Duck bro­ken

En­tic­ing div­i­dend play

Finweek English Edition - - Insight - MARC HASEN­FUSS march@fin­

DI­RECT RE­TAIL­ERS haven’t shown a propen­sity to play a long and re­ward­ing in­nings on the JSE – un­til ear­lier this month. Most had scin­til­lat­ing starts but then faded in tough times and even­tu­ally opted to run for cover by delist­ing from the JSE. Mas Hold­ings man­aged to strug­gle through to the late Nineties be­fore de­part­ing the bourse with its tail firmly tucked be­tween its legs.

House­wares (listed 1994), Home Choice (1996) and Her­itage Col­lec­tion (re­verse listed 2000) all had abridged tenures on the JSE. And it was all re­ally the same old story: a bright, breezy trad­ing pe­riod af­ter list­ing giv­ing way to a dim pe­riod dur­ing which the com­pa­nies man­aged to veer into a ditch.

Only last year did Ver­i­mark – which re­verse listed in 2005 and pro­duced its best re­sults ever in 2006 – look primed to fol­low its pre­de­ces­sors out the door. Ver­i­mark’s delist­ing ef­fort – pitched at 50c/share – was halted last year.

While Ver­i­mark was pre­vented from bolt­ing from the JSE, there re­mained some se­ri­ous ques­tions about its turn­around po­ten­tial. To date, no listed di­rect re­tailer had ac­tu­ally man­aged to pro­duce a turn­around and most ob­servers would prob­a­bly only have pen­cilled in a re­turn to mod­est prof­its by Ver­i­mark for fi­nan­cial 2011.

Af­ter the re­lease of Ver­i­mark’s year to end-Fe­bru­ary re­sults – which pro­duced pre-tax prof­its of R20m and (crit­i­cally) a div­i­dend of 6c/share – you’re tempted to pro­claim it’s bro­ken the JSE’s di­rect re­tail­ing “duck” in style. In­deed, its sec­ond six months trad­ing would ap­pear to be freak­ish, with R31m gen­er­ated in pre-tax prof­its – enough to wipe out its in­terim losses and leave a chunk of profit for the year.

Nat­u­rally, ques­tions will now turn to sus­tain­able prof­its. Fin­week reck­ons the most im­por­tant cog in sus­tain­able profit per­for­mance is Ver­i­mark CEO, founder and ma­jor­ity share­holder Michael van Straaten. As we’ve pointed out be­fore, Van Straaten never lin­gered bit­terly on the failed delist­ing ex­er­cise. Our im­pres­sion is that Van Straaten is as en­thu­si­as­tic about the busi­ness as he ever was and – most im­por­tantly – he seems to be en­joy­ing work­ing with his new man­age­ment team.

There cer­tainly is enough to keep the mar­ket in­ter­ested – es­pe­cially the prospect of gen­er­ous div­i­dends. It’s worth mulling the fact Ver­i­mark has de­clared that half of at­trib­ut­able prof­its will be paid out to share­hold­ers when close to R25m (roughly 23c/ share) was earned at bot­tom line in the sec­ond half of the year to end-Fe­bru­ary 2010.

MICHAEL VAN STRAATEN Do­ing what he loves

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