Delisting attempt knocks Verimark earnings
October 30, 2009
By Florence de Vries
Verimark expects headline losses of between 9.1c and 11.1c for the six months to August, partly due to money spent by the executive team in an attempt to delist the retailer.
This was announced yesterday by chief executive Mike van Straaten.
Van Straaten's attempt to vote his own shares in a proposed delisting had reached a dead end in court in August, with the ruling that he was not entitled to vote in favour of the buyout. At the time, he was quoted as saying the process had been very expensive and drawn out.
In a trading statement released yesterday, Verimark attributed the reduction in earnings to the effect of "some once-off abnormal items that do not relate to the trading results". Van Straaten admitted that the group's attempt to delist in the review period was one of the once-off items that led to the headline earnings loss.
Van Straaten was hesitant to talk about the other items, which are expected to result in a "normalised" headline loss a share of 3.1c to 5.1c, compared with 5.2c in the previous period.
Mark Ansley, an analyst at Cadiz Asset Management, said the abnormal items were due to expenses the company had to incur to defend its listing objective, which would include legal and consulting fees. Ansley said the firm had been buying franchise stores and converting them into corporate ones, which might have resulted in some abnormal items.
Verimark's turnaround strategy had gained momentum in the latter part of the reporting period with the benefits of the conversion to corporate-owned stores in terms of better turnover and margins somewhat offset by the corresponding increase in costs associated with the daily operations of these stores.
It was too early to predict whether there would be a turnaround for the full year. "The next six months will show whether the new management team... can produce the results we want," van Straaten said.
Turnover for the interim period rose, while the gross profit margin improved on better product mixes and the firming of the rand.
The novelty of products boosted the group's sales. "This, with the benefit of improved space allocation in the key retail stores, are key to the future of Verimark," Ansley said.
Verimark closed unchanged at 39c on the JSE yesterday.
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