Verimark banks on new product line for a bright future

JSE-LISTED and South Africa’s market leading direct retail group Verimark has said that the increase in the number of new products introduced will have a positive effect on the growth of its business in the future.

Chief executive Michael van Straaten said Verimark would usher in more products into the market, even though this could come at a cost of advertising, especially on television.

Van Straaten said the introductions and related cost accounted for the decline in profits in the six months to end August.

He said he and the company’s marketing team had just toured the US, Europe, China and Hong Kong in a bid to popularise the company.

“It is important for us to attend those exhibitions and do research in order to find new concepts,” Van Straaten said.

The group reported a decline of 43.59 percent in profit before tax to R2.2 million, down from R3.9m reported a year ago.

It said profits had come down in comparison to the prior year’s six months trading due to increased products introduced, which resulted in the higher advertising spend. Verimark, however, expects to reap the financial benefits of the introduction of new products in the months ahead.

The group, however, recorded a 13.7 percent increase in revenue from continuing operations to R209.7m, up from R184.4m. “The increase is mainly attributable to the price decreases, which occurred in March compared to the price increases in the prior year, higher advertising spend which resulted from the increased number of new products introduced, and additional stores made available by retail partners,” Van Straaten said.

The group said as it is the case with all importers, Verimark’s growth and profitability continued to be dependent on the rand dollar exchange rate. “To reduce the impact of currency risk, Verimark will continue to grow its international division, which was re- activated a year ago,” the group said.

Operating costs increased by 12.1 percent to R87.7m, up from R78.2m, while net finance charges increased by R0.98m, due to changes in working capital as cash has been utilised to ensure sufficient inventory levels.

Diluted earnings per share from continuing operations were down to 1.1 cents a share as compared to last year’s 2.3c.

Van Straaten said Verimark had increased its inventory levels and its product mix for the year ahead to ensure maximum revenue growth over the festive season. “In the past six months, necessary costs were incurred through higher inventory levels, increased advertising costs, store set-up costs, which has positioned the company well to deliver an improved second half year performance,” Van Straaten said.

The group did not declare a dividend for the period.

Verimark shares declined 3.53 percent on the JSE yesterday to close at 82 cents.