Ver­i­mark banks on new prod­uct line for a bright fu­ture

The Mercury - - COMPANIES - Sandile Mchunu

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.

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