Consumer products company Verimark’s revenue for the six months to August 31 grew by 13.7% to R209.7-million, but its pre-tax profit decreased to R2.2-million, from R3.9-million during the first half of the prior financial year.
The lower profit is owing to an increase in new products, which resulted in an 85.7% increase in advertising spend. The company expects financial benefits as a result of the introduction of the new products in the months ahead.
“Verimark has increased its inventory levels and its product mix to support revenue growth over the festive season. In the past six months, necessary costs were incurred through higher inventory levels, increased advertising costs and store setup costs, which has positioned the company well to deliver an improved second half year performance,” CEO Michael Van Straaten said on Thursday.
“Operating costs increased by 12.1% to R87.7-million and is directly correlated to the increase in revenue. While cost containment remains crucial, upfront costs are necessary to ensure future growth,” he added.
Gross profit increased by 10.6% to R88.6-million in the six months under review.
The economic environment is expected to remain challenging.
“Business confidence continues to decline, resulting in lower consumer spend, which is affecting all consumer-related retailers. We anticipate this trend to continue, [which] will result in a tougher retail trading environment for the remainder of this year,” said Van Straaten.
The company will also continue to grow its international division, which has been reactivated and refocused, he concluded.