Verimark Holdings Limited (Incorporated in the Republic of South ...

Verimark Holdings Limited(Incorporated in the Republic of South Africa)Registration Number: 1998/006957/06Share Code: VMKISIN: ZAE000068011("Verimark" or "the Group")UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2013HIGHLIGHTS- Revenues up 0.4% to R195,2 million (2012: R194,6 million)- Operating profit R3.2 million (2012: Operating loss R5,1 million)- Loss before tax R1,2 million (2012: R4,4 million)- Basic EPS at (1,1) cents (2012: (5,1) cents)- Headline EPS at (1,2) cents (2012: (5,2) cents)- On-going focus to protect profit margins by aligning selling prices to the weaker exchange rate andcontrolling of costs- Operational efficiencies beginning to produce results- Market leader position maintainedOVERVIEWThe trading environment has continued to be challenging over the present period. A negative impacton sales and product margins was brought about largely by the Rand’s further depreciation againstthe Dollar; which impacted the cost of purchasing and procuring of inventory. The operationalefficiencies that resulted from consolidating the head office and warehousing operations into a single,larger premises, are beginning to bear fruit and contributed, during the period, towards animprovement in the group’s operating profit.Revenue for the six month period under review was up 0.4% compared to the same period last year.This was mainly due to the negative volume impact that resulted from the increase in selling prices ofa number of key products.Despite the selling price increases which were implemented during the second half of the previousyear, the cost of imports of new products and components was negatively impacted by the ongoingdepreciation of the Rand against the US Dollar resulting in a decrease in product margins.The improvement in the operating profits is as a result of the efficiencies generated from operating outof one consolidated premises, together with the introduction of new warehouse information systems,and various cost improvement initiatives. This improvement was achieved despite additionalexpenses incurred due to the capital investments made in the prior year (for example, increaseddepreciation, rent straight lining charges) together with the cost of expansion initiatives, including theinternational expansion.The volatility and devaluation of the Rand exchange rate resulted in a foreign exchange loss of R2,7million being reported (2012: R1,7 million foreign exchange profit) in the current period. Together withthe higher utilisation of overdraft facilities during the earlier part of the current reporting period, thisresulted in higher finance expenses being reported.Management’s efforts to reduce inventory levels as at the end of February, together with theimprovement in profitability have resulted in positive cash generated from operations of R8.0 million(2012:- R14.5 million cash utilised).To further increase and improve the level of new product development and introductions, as well as astrategy to expand internationally; additional staff and managers were appointed during the period,and further skills will be sought in the future.“In February, we announced that we would focus on three core areas of growth, namely, theimprovement of operating efficiencies; improving our product development and marketing capabilities;and looking at potential international opportunities and new markets. I believe we have made good

progress on all of these fronts and will continue to do so moving forward,” Michael Van Straaten CEOof Verimark said.INTERIM DIVIDENDIn light of the overall trading results for the six months ended 31 August 2013 the Board hasconsidered it prudent not to declare a dividend.Dividend payments will be reconsidered in accordance with the existing pay-out policy on completionof the current financial year.BASIS OF PREPARATIONThese summarised financial statements have been prepared in accordance with the measurementand recognition requirements of IFRS, the presentation and disclosure requirements of IAS 34 InterimFinancial Reporting, the SAICA Financial Reporting Guides issued by the Accounting PracticesCommittee and Financial Reporting Pronouncements as issued by Financial Reporting StandardsCouncil, the Listing Requirements of the JSE Limited and the Companies Act of South Africa.The accounting policies used to prepare this report are consistent with those used in the previousannual financial statements except for any new standards and interpretations that became effective.The adoption of these standards has had no material effect on the results for the period nor has itrequired the restatement of any prior year amounts. The summarised group financial information hasbeen presented on the historical cost basis, except for financial instruments and share basedpayments carried at fair value, and are presented in Rand thousands which is Verimark’s functionaland presentation currency.The interim results as reported herein have been prepared by Verimark’s Financial Director, ShaunBeecroft CA (SA).SEGMENTAL ANALYSISDuring the prior year the Group expanded to Singapore where a company was registered. Per IFRS8, the reporting of operating segments as part of Group’s operations are now split between SouthAfrica and Foreign.CHANGES TO THE BOARDThere were no changes to the board.SUBSEQUENT EVENTSNo events material to the understanding of this report have occurred in the period between thereporting date and the date of this report.PROSPECTSVerimark is committed to further entrench its position as the leading innovator, improving operationalefficiencies, increasing product development & management capability and expanding internationally.To mitigate the impact of a volatile currency, selling prices will regularly be adjusted to ensure grossmargins are better aligned with the continuous increase in product costs over the previous two years.The focus on the operating efficiency and business performance initiatives remain priority and areexpected to continue to bear fruit in the future.Based on the actions noted above, the Board is confident that the medium- and long-term prospectsof Verimark remain positive.The interim results for the period ended 31 August 2013 have not been reviewed or audited by theGroup`s auditors.Statements regarding the future prospects of performance of the Group have not been reviewed orreported on by the Group’s auditors.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEUnauditedsix monthsended 31August 2013Unauditedsix monthsended 31August 2012Audited twelvemonths ended28 February2013R’000 R’000 R’000Revenue 195 291 194 560 454 091Operating profit / (loss) before net finance expense3 228 (5 134) 16 586and taxationFinance income 229 2 504 6 391Foreign exchange gains realised 225 2 451 6 322Interest income from financial assets 4 53 69Finance expense (4 605) (1 802) (7 732)Foreign exchange losses realised (2 817) (687) (4 088)Interest expense from financial liabilities (1 788) (1 115) (3 644)(Loss)/ profit before taxation (1 148) (4 432) 15 245Income tax (27) (848) (6 367)(Loss) / profit for the period (1 175) (5 280) 8 878Foreign currency translation reserve movement (17) - 13Total comprehensive income for the year attributable (1 192) (5 280) 8 891to owners of the CompanyEarnings per share (EPS) (1,1) (5,1) 8,5Headline Earnings per share (HEPS) (1,2) (5,2) 8,4

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONUnauditedsix monthsas at 31August 2013Unauditedsix monthsas at 31August 2012Audited twelvemonths as at28 February2013R’000 R’000 R’000AssetsPlant and equipment 16 867 14 353 18 578Intangible assets 14 998 14 503 14 426Deferred taxation asset 3 198 2 914 3 208Non-current assets 35 063 31 770 36 212Inventories 60 862 61 250 87 494Trade and other receivables 69 320 72 768 77 810Prepayments 363 206 353Prepaid taxation - 1 404 -Bank and cash balances 995 463 1 454Current assets 131 540 136 091 167 111Total assets 166 603 167 861 203 323Equity and liabilitiesShare capital 346 346 346Share premium 21 378 21 378 21 378Share Based Payment Reserve 409 985 1 124Foreign Currency Translation Reserve (4) 13Retained earnings 63 412 50 429 64 587Equity Attributable to the equity holders of the85 541 73 138 87 448parentInterest-bearing liabilities 5 147 4 918 5 944Non-current liabilities 5 147 4 918 5 944Trade and other payables 26 119 40 442 59 326Preference share liability 17 589 15 872 17 012Short-term portion of interest bearing liabilities 11 704 2 499 3 480Bank overdraft 20 472 30 992 28 463Taxation payable 31 - 1 650Current liabilities 75 915 89 805 109 931Total equity and liabilities 166 603 167 861 203 323

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYShare ShareCapital PremiumForeigncurrencytranslationreserveRetainedearningsSharebasedpaymentreserveTotalR’000 R’000 R’000 R’000 R’000 R’000346 21 378 - 393 58 509 80 626Balance at 28 February2011Comprehensive IncomeProfit for the year - - - - 26 808 26 808Transactions withowners recorded inequityIFRS 2 share-basedpayment transactionContributions by anddistributions to ownersof the CompanyDividend paid to equityowners- - - 395 - 395- - - - (15 583) (15 583)Balance at 29 February 346 21 378 - 788 69 734 92 2462012Comprehensive IncomeProfit for the year - - - - 8 878 8 878Foreign currency- - 13 - - 13translation reserveTransactions withowners recorded inequityIFRS 2 share-basedpayment transaction- - - 336 - 336Contributions by anddistributions to ownersof the CompanyDividend paid to equityowners- - - - (14 025) (14 025)Balance at 28 February 346 21 378 13 1 124 64 587 87 4482013Comprehensive IncomeLoss for the period - - - (1 175) (1 175)Foreign currency- - (17) - - (17)translation reserveTransactions withowners recorded inequityIFRS 2 share-basedpayment transaction- - - (715) - (715)Balance at 31 August2013346 21 378 (4) 409 63 412 85 541

CONSOLIDATED STATEMENT OF CASH FLOWSUnauditedsix monthsended 31August 2013Unauditedsix monthsended 31August 2012Audited twelvemonths ended28 February2013R’000 R’000 R’000Net cash inflows / (outflows)from operating activities 2 559 (32 752) (23 600)Cash generated / (utilised) by operations 8 008 (14 461) (1 668)Dividends paid - (14 025) (14 025)Finance income 229 2 504 6 391Finance costs (4 028) (1 248) (6 016)Taxation paid (1 650) (5 522) (8 282)Cash outflows from investing activities (2 453) (3 136) (10 755)Acquisition of plant and equipment (3 131) (3 854) (11 577)Acquisition of intangible assets (6) - (82)Proceeds from disposal of plant and equipment 684 718 904Cash inflows / (outflows) from financing activities 7 427 (2 458) (472)Interest-bearing liabilities raised 9 329 - 5 114Interest-bearing liabilities repaid (1 902) (1 918) (5 046)Preference share liability repaid - (540) (540)Net increase / (decrease) in cash and cash7 533 (38 346) (34 827)equivalentsCash and cash equivalents at beginning of period (27 010) 7 817 7 817Cash and cash equivalents at end of period (19 477) (30 529) (27 010)SEGMENTAL INFORMATIONSouth Africa Foreign Group Elimination TotalR’000 R’000 R’000 R’000Revenue 194 728 563 - 195 291Loss before tax (410) (685) (53) (1 148)Loss after tax (410) (726) (39) (1 175)Segment Assets 166 954 2 493 (2 844) 166 603Segment Liabilities 80 885 3 021 (2 844) 81 062

DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGSUnaudited Unauditedsix months six monthsended 31 ended 31August 2013 August 2012Audited twelvemonths ended28 February2013R’000 R’000 R’000Attributable (loss)/profit (after tax) (1 175) (5 280) 8 878Profit on sale of plant and equipment (104) (106) (187)Tax on profit on sale of plant and equipment 29 30 52Headline (loss) / earnings (1 250) (5 356) 8 743Shares in issue 114 272 328 114 272 328 114 272 328Treasury shares - VEET (4 000 000) (4 000 000) (4 000 000)Shares held by subsidiary (6 380 870) (6 380 870) (6 380 870)Number of shares at period end 103 891 458 103 891 458 103 891 458Share options dilutive portion 702 861 1 877 493 2 094 538Diluted weighted average shares 104 594 319 105 768 951 105 985 996Basic earnings per share (1,1) (5,1) 8,5Headline earnings per share (1,2) (5,2) 8,4Diluted basic earnings per share (1,1) (5,0) 8,4Diluted headline earnings per share (1,2) (5,1) 8,2Net asset value per share 82,3 69,1 84,2Net tangible asset value per share 67,9 55,4 70,3On behalf of the BoardMichael van StraatenShaun BeecroftChief Executive Officer Financial DirectorJohannesburg10 October 2013Directors:Dr J T Motlatsi (Chairman)*, J M Pieterse*, M J van Straaten (CEO), S RBeecroft, M Patel**Independent Non-executiveCompany Secretary:Premium Corporate Consulting Services (Pty) LtdRegistered office:50 Clairwood AvenueHoogland Ext 55,Randburg 2194Postal address:Verimark Holdings LimitedPO Box 78260, Sandton 2146Email address:investors@verimark.co.zawww.verimark.co.zaTransfer Secretaries:Computershare Investor Services (Pty) LimitedAuditors:KPMG IncorporatedSponsor:Grindrod Bank Limited