Hit by expenses and infrastructure burdens, direct response retailer, Verimark Holdings on Tuesday reported a dip in diluted headline earnings per share (HEPS) of 6.9 cents for the six months ended August, from 9.7 cents previously. Revenue was down 2.2% to R196.2 million.
"We virtually doubled Verimark in two years and that brought about massive pressure on operational infrastructure.
"There were [some] expenses that we could have controlled better like logistics and delivery charges," CEO Michael Van Straaten told I-Net Bridge/BusinessLIVE.
The company's revenue increased 38% and 33% respectively over the last two years and this led to it outgrowing its warehouse in Randburg, Johannesburg.
"In October last year we had to rent another warehouse, and this brought about an immediate duplication of costs - people, trucks, security," Van Straaten added.
Verimark said that although progress was made in better aligning expenses with turnover, some increased expenses would take longer to be resolved, like the company's new head office/distribution centre - nearly double the size of the existing one - which will only be completed in 12 months.
Inflationary increases on expenses resulted in profit before tax being 23.4% down compared with the same period last year.
The group opened five stores over the period under review.
Looking ahead, the group said a number of new products had been tested very successfully and would be launched during the next six months.
"Our profitability is split between a third in the first six month period, versus two thirds in the second six month's. This means there's vast profitability generated over the Christmas period. We're very optimistic," Van Straaten said.
Verimark was established in 1977, with a staff of two people and a capital base of R5000.
Today, the group employs around 1000 people in over 80 stores and its product range covers houseware, health and fitness, DIY, automotive, beauty and educational toys.
