Verimark's shares surge over 25% on profit optimism

Cape Town - The share price of Verimark [JSE:VMK] jumped by almost 26% by early afternoon on Thursday, after the retail group said in a trade update to shareholders that it expects improved profits for the financial year ended February 28 2018.

By 13:04 the share price was up by 25.93% to R1.02.

The group expects the improvement in profit despite what it calls a challenging retail environment. It listed economic instability due to Cabinet reshuffles; South Africa's downgrades by ratings agencies; and a decline in the country's gross domestic product as challenges it faced during the financial year.

Verimark said it expects a profit before tax of between R43m and R50.4m - an increase of between 15.1% and 35.1% on the R37.3m during the previous comparative period.

Headline earnings per share are expected to be in the range of 29.5 cents and 34.3c per share - an increase of between 22.8% and 42.8% on the previous comparative period.

The group said the tough economic environment resulted in a volatile rand against foreign currencies.

"Although the rand has strengthened significantly over the last few months, the average rand dollar exchange rate only strengthened by 8.27%.

"This strengthening of the rand, together with the introduction of a greater number of exceptional products contributed to improved sales and profits."

Verimark said it also focused on reduction and containment of costs, which helped to produce favourable results. This, it said, was achieved through a renewed cost benefit analysis, managing variable costs, and the elimination of wasteful expenditure. This led to cost increases being contained to below sales growth levels, as well as improved profitability.

The company expects to release its full year results on or about May 22 2018.

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