Marc Hasenfuss: Market Watch

record. What’s more, the share is illiquid, and scrip too tightly held to warrant much participation by institutional investors. The biggest drag on enthusiasm for Verimark is, of course, the weak rand. The business imports almost all of its array of weird and wonderful gadgets, and it is near impossible (especially now) to pass on price increases to customers.

Verimark, I think, has done rather well extracting efficiencies (especially via its new distribution centre), but there is only so much management can do to keep a lid on costs and curtail marketing expenditure.

There is now a concerted effort to delve into selected offshore markets. I doubt Verimark will rush this effort, so it may be some years before hard currency flows strongly into the revenue line. What is encouraging is that Verimark’s cash generated from operations improved by a chunky R22m to R31m.

That’s equivalent to around 29c/share. If the rand holds steady, or even firms, and Verimark can ease through a price increase, then we might see a better interim period to end August. If Christmas sales are sprightly then Verimark should at least post earnings of around 16c/share for the new financial year. With a balance sheet that is not stretched dangerously, dare we envisage a dividend payout of 8c/share? On the ruling share price that would be a very handsome yield.

Unrealistic? Perhaps. But it’s interesting to note that the dividends declared by Verimark since 2010 tally up to 44c, which is the share price at the time of writing. For investors able to endure the best and worst of times, Verimark could prove to be a real X-factor in a small-cap portfolio.