10 May 2010 23:14

Verimark interim results: Mike van Straaten – CEO, Verimark

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Alec Hogg is a writer and broadcaster. He founded Moneyweb

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    The stock jumped 47% after record half-year results were released.


    ALEC HOGG: Over the past few months we've had some fascinating conversations in the studio with Mike van Straaten. I see on the day when he comes out with good news for a change he didn't make it to us. But he is certainly on the line. Mike, to be the best-performing share on a day when the JSE's up by 4.25% takes some doing. But to go up 47% in a single session, as Verimark's share price has done today, is extraordinary. Extraordinary, though, because the last time we spoke you were telling us how badly the company was doing.

    MIKE VAN STRAATEN: Good evening, Alec, and good evening to your listeners. Firstly thank you for the opportunity. I couldn't be in the studio tonight - as you know, we had our result presentation here. Alec, the difference is clearly about 12 months apart. As I said, we have seen the business activity change substantially over the last few months of the financial year.

    ALEC HOGG: Aren't you a bit embarrassed, though, because you were telling everyone you were going bust and you wanted to buy them out? You even went as far as going to court to ensure that you could do the dirty on minority shareholders, and now you are coming out with spectacular numbers.

    MIKE VAN STRAATEN: Well, Alec, to be fair history and hindsight is an exact science. It's very easy to look back and say what you should have done a year ago. The reality at that point in time was Verimark had declining sales and profits leading to a R4m loss at the end of the previous financial year. The whole management structure was falling apart. We didn't have people in place and there were serious uncertainties whether we could carry on or whether we could make it come back. And in fact the following six months, if you can recall, we delivered a loss of R11m, which is the worst ever in Verimark's history. That's for the first six months of the year. Clearly the business was in a very, very different position from where it is today. And that is the reality of entrepreneurial business that is based on innovation, based on managers that have that entrepreneurial spirit. And we were just very thankful that we have had such a good run in the last six months of the year.

    ALEC HOGG: Mike - you are sticking to the story that you didn't know that things were going to get this much better?

    MIKE VAN STRAATEN: Alec, it's a simple situation. If we knew then what we know now, that the new management team could turn this business around in 12 months from taking that decision, we would never have applied to delist. Simple as that, you understand. There was no hidden agenda. We genuinely were on our knees, things were tough. I didn't even have a financial director, if you recall, the position I found myself in...

    ALEC HOGG: I remember you lost a financial director, the new guy came in and he was only there for two months and he departed as well, so...

    MIKE VAN STRAATEN: That is the point I am making. Clearly there was no hidden agenda. As I said, hindsight - always easy to say what you should have done. I even recalled when I walked out of your studio and we discussed this, saying that there is actually a no-win situation; if Verimark ultimately doesn't make it it would look like I actually offered too much. On the other hand, if Verimark does well it's going to appear that we were clearly not honest in our dealings. But we are really happy. There was no hidden agenda. Clearly, if you do well, to be a listed entity is the right place to be. If you do poorly you don't want to be there. And I'm just pleased for the sake of all our shareholders and the staff of Verimark - because a lot of effort went into this turnaround - that we ultimately did get it right. I think there were a lot of doubts because we tried for three years, Alec, to turn this business around. We were not successful. As we said, at this time last year really, our cash flows were tight, we were struggling, we didn't have managers in place - and that is where we found ourselves. But fortunately by keeping our heads down and working as hard as we could, things clicked in and...

    ALEC HOGG: But surely there must be luck, because you've got a limited number of products, only 15-odd products that you do sell? And if you can hit a couple of jackpots the bottom line does improve.

    MIKE VAN STRAATEN: Alec, as I said, the whole issue of new products is not an exact science. I always said it's more a piece of art. I think Verimark does get it more right than anybody else, probably, in the world, but we sadly did not get it right for a three-year period. I think the new product introductions were sorted out about a year-and-a-half ago, closer to two years, but we did not really see the sales because the one problem led into the other because when we didn't have the products some of the retailers felt that, listen, maybe we had too much space - or let's move Verimark more to the side of the store. And unfortunately that had a ripple effect, further worsening the situation.

    ALEC HOGG: Things are better now for Verimark, but I think from what you've told us it's still fairly speculative because things can go wrong just as quickly as they went totally right.

    MIKE VAN STRAATEN: Alec, I'm not going to say that, listen, there's no challenges ahead of us. There's still some further cleaning up to be done at Verimark. But I think if you see under what conditions we had to work, under what pressures, when the retail sector as such - I think the official SA Stats figure is minus 4.9% for the last 12 months, even in February it was minus 1.5%. If Verimark can grow - and we are at some stage where the figures in big groups average over a three-month period 60% up, that is really very, very impressive figures. So to say that has all of a sudden come to a standstill - there will be challenges, we need to obviously add to the range. And, looking forward, we are obviously optimistic that we've made good headway. A few more products are coming on line in March/April...

    ALEC HOGG: Well, the best of luck to you, Mike van Straaten, in your recovery. As I said. It's the best turnaround since Lazarus stood up and walked again.

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