Enticing dividend play
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