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SKW - Skinwell Holdings Limited - Audited Condensed Group Financial Results for
the year ended 28 February 2011
SKINWELL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
JSE code: SKW
ISIN: ZAE000135893
("Skinwell" or "the company" or "the group")
AUDITED GROUP CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2011
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
February February
2011 2010
R`000 R`000
Revenue 56 572 69 894
Cost of sales (16 830) (34 351)
Gross profit 39 742 35 543
Other income 2 298 5 311
Operating costs (40 774) (69 223)
Impairment of goodwill - (2 439)
Earnings/(losses) before interest, 1 266 (30 808)
taxation, depreciation and
amortisation
Depreciation and amortisation (921) (1 257)
Profit/(Loss) before interest and 345 (32 065)
taxation
Investment revenue 974 1 521
Finance costs (2 210) (3 702)
Loss before taxation (891) (34 246)
Taxation 379 8 441
Total comprehensive loss (512) (25 805)
attributable to ordinary
shareholders
Reconciliation of headline loss:
Loss attributable to ordinary (512) (25 805)
shareholders
Adjusted for:
(Profit)/Loss on sale of property, 150 805
plant and equipment
Profit on disposal of subsidiary - 1 212
Impairment of goodwill - 2 439
Headline loss attributable to (362) (21 349)
ordinary shareholders
Number of ordinary shares in issue
on which earnings per share are
based
weighted and diluted average 236 172 773 155 364 544
Loss per share (cents) (0.22) (16.6)
Headline loss per share (cents) (0.15) (13.7)
Diluted loss per share (cents) (0.22) (16.6)
Diluted headline loss per share (0.15) (13.7)
(cents)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
February February 2010
2011 R`000
R`000
ASSETS
Non-current assets 26 090 26 326
Property, plant and 5 515 5 109
equipment
Goodwill and intangible 7 282 6 888
assets
Other financial assets 1 436 3 223
Deferred taxation 11 857 11 106
Current assets 22 211 30 798
Inventories 11 680 10 051
Other financial assets 4 207 9 194
Current tax receivable 86 164
Trade and other receivables 6 144 11 268
Bank and cash 94 121
Total assets 48 301 57 124
EQUITY AND LIABILITIES
Equity 19 479 19 992
Share capital 49 830 49 830
Retained earnings (30 351) (29 838)
Non-current liabilities 4 292 5 755
Other financial liabilities 4 292 5 442
Finance and operating lease - 310
liabilities
Deferred taxation - 3
Current liabilities 24 530 31 377
Shareholders` loans 3 216 164
Trade and other payables 9 730 15 708
Other financial liabilities 6 133 9 344
Taxation 795 860
Finance and operating lease 352 312
liabilities
Bank overdraft 4 304 4 989
Total equity and liabilities 48 301 57 124
Number of ordinary shares in 236 172 773 236 172 773
issue at year-end
Net asset value per share 8.2 8.5
(cents)
Net tangible asset value per 5.2 5.5
share (cents)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Total Accumulat Total
capital premium share ed loss equity
R`000 R`000 capital R`000 R`000
R`000
Balance 1 March 2009 13 44 071 44 084 (4 034) 40 050
Total comprehensive (25 805) (25
loss for the year 805)
Issue of shares 11 6 874 6 885 6 885
Issue costs written off (1 139) (1 139) (1
139)
Total changes 11 5 735 5 746 (25 805) (20
059)
Balance 1 March 2010 24 49 806 49 830 (29 839) 19
991
Total comprehensive (512) (512)
loss for the year
Total changes - - - (512) (512)
Balance 28 February 24 49 806 49 830 (30 351) 19 479
2011
CONDENSED GROUP CASH FLOW STATEMENT
Audited Audited
February February
2011 2010
R`000 R`000
Cash flows used in operating (2 448) (18 333)
activities
Cash flows from investing 4 742 5 508
activities
Cash flows (to)/from financing (1 636) 9 242
activities
Net increase/(decrease) in cash 658 (3 583)
and cash equivalents
Cash and cash equivalents at (4 868) (1 285)
beginning of period
Cash and cash equivalents at end (4 210) (4 868)
of period
CONDENSED GROUP SEGMENT REPORT
Audited Audited
February February
2011 2010
R`000 R`000
Revenue
Brands 56 572 57 154
Supply chain and support (1) - 14 369
Inter-segment - (1 629)
56 572 69 894
Total comprehensive loss
attributable to ordinary
shareholders
Brands (512) (24 185)
Supply chain and support - (423)
Inter-segment - (1 197)
(512) (25 805)
Depreciation
Brands 921 746
Supply chain and support - 487
Inter-segment - 24
921 1 257
(1) The supply chain and support segment, being the manufacturing subsidiary
and the training division, was disposed of in 2010 as part of the overall
turnaround strategy of the company.
OVERVIEW
The directors of Skinwell herewith present the audited annual financial results
for the year ended 28 February 2011 ("the 2011 year" or "2011"). Skinwell is
mainly a franchisor, distributor and service provider of beauty offerings,
represented in its own and franchised distribution footprint of almost 100
beauty salons nationally, other large retailers, independent salons and
pharmacies. The group experienced an increase in system-wide sales revenue for
the 2011 year of 16% to R117 million (2010: R101 million) in respect of its
Placecol, Dreamnails & Body and World of Beauty branded salons.
The directors and management are of the view that the turnaround strategy is
beginning to show the results envisaged. The beauty industry remains, however,
a very competitive environment, but the fact that the group has its own
distribution footprint and brands benefited the group during a challenging year.
It will remain a priority of management, during the forthcoming financial year,
to further improve credibility in the marketplace.
Beauty care remains a priority to South African consumers, however consumers
remain very cautious and price-sensitive and will continue to be prudent in the
years ahead. The focus of the consumers has shifted to beauty maintenance
products compared to seasonal offerings. Consumers are continuously trading
down and are searching for promotional offerings. Innovation and new product
launches also continued to stimulate consumer interest in the market according
to the Euromonitor International report released in July 2010, Beauty and
Personal Care - South Africa.
During the 2011 year the group rolled out a new Point of Sales system to more
than 80 of its corporate and franchised beauty outlets with the objective to
install it into the remainder of beauty outlets imminently. This has
significantly enhanced and simplified monthly reporting and the tracking of
promotions held within the group. In conjunction with the new Point of Sales
system, the group rolled out an integrated Gift Card system which resulted in
overall cost savings for the group.
Two new Placecol branded salons were opened during the 2011 year in Sea Point
and George in the Western Cape. The group has successfully converted four of
its existing beauty salons to the World of Beauty brand, which is a one-stop
innovative offering that incorporates all beauty services (skin, nails and hair
care).
Strategic considerations dictated the de-franchising and the closure of certain
outlets during the 2011 year which resulted in the group increasing its number
of corporate outlets to 16 at year end. These outlets are included under
inventories as they are available for resale. The assessment of corporate store
profitability is an ongoing process and continued emphasis will be placed by the
group on restoring the profitability of all corporate stores.
In order to improve the overall profitability of the franchise chain, the group
has successfully launched new treatments and retail slimming products, which
were beneficial to the group`s system-wide sales during the 2011 year. By
strengthening the training team, the group has trained many therapists during
the 2011 year in terms of general continuous training, in order to improve
overall service levels.
The group received certain accolades where Placecol branded salons were voted as
the Number 1 Beauty Salon as part of the Beeld Newspaper readers` awards in
November 2010 and Dreamnails and Body salons as the Number 1 Nail Salon by the
Star Newspaper, as part of the Star`s Annual Reader`s Choice Awards December
2010.
Cash flow remained a constraint during the 2011 year, and further funding
through shareholders` loans was required. An improvement in cash flow was
achieved during the latter part of the financial year. Reduced stock purchases
and the festive season which normally results in an upturn in the beauty
industry contributed to this.
FINANCIAL RESULTS
While system-wide sales increased with 16%, company revenue decreased by 19% to
R56.6 million (2010: R69.9 million). The decrease in revenue is as a result of
less beauty outlets being opened during the 2011 year, the disposal of the
manufacturing concern and training institute in 2010, the closure of certain
loss making beauty outlets during the 2011 year and the overall condition of the
economy.
Gross profit increased by 12% to R39.7 million (2010: R35.5 million) and gross
profit margins improved to 70.3% (2010: 50.9%), due to increased royalty revenue
without associated cost of sales.
Operating costs decreased by 41% to R40.8 million (2010: R69.2 million) as a
result of significant cost savings implemented as part of the group`s turnaround
strategy. The group`s marketing and advertising spend increased towards the
latter part of the year. Operating costs for 2011 include once off retrenchment
costs incurred of approximately R783 000.
Earnings before interest, taxation, depreciation and amortisation increased to
R1.3 million (2010: loss of R30.8 million). Losses attributable to ordinary
shareholders decreased to R512 400 (2010: loss of R25.8 million). Loss per
share decreased to 0.22 cents (2010: loss of 16.6 cents) and headline loss per
share decreased to 0.15 cents (2010: loss of 13.7 cents).
Corporate stores available for resale to the value of approximately R5 million
are included in inventories. It will be a primary focus point of management to
sell these stores to franchisees in order to strengthen the cash flow of the
group. The group had no material capital commitments for the purchase of
property, plant and equipment as at 28 February 2011.
BASIS OF PREPARATION OF THE AUDITED RESULTS
The audited condensed group financial results have been prepared in accordance
with the recognition and measurement criteria of International Financial
Reporting Standards "IFRS", the AC 500 Standards as issued by the Accounting
Practices Board, the presentation and disclosure requirements of IAS 34 -
Interim Financial Reporting, the Listings Requirements of the JSE Limited and
the requirements of the South African Companies Act.
The accounting policies and method of measurement and recognition applied in
preparation of the audited group annual financial statements are consistent with
those applied in the group`s annual financial statements for the year ended 28
February 2010, which complied with IFRS.
These condensed group annual financial statements incorporate the financial
statements of the company and its subsidiaries.
STATEMENT OF GOING CONCERN
The financial results have been prepared on the going concern basis as the
directors are of the view that the group has adequate resources in place to
continue in operation for the foreseeable future.
AUDIT OPINION
The auditors, SAB&T, have audited the condensed group annual financial
statements for the year ended 28 February 2011. The auditors` unmodified audit
report is available for inspection at the company`s registered office.
PROSPECTS
The group remains cautious, but the interventions such as certain marketing
initiatives, as well as training initiatives are yielding positive returns. The
overhead cost structure will be monitored closely and further cost savings will
be implemented where appropriate.
The group has formed certain strategic alliances to strengthen its own in-house
research on product development and innovation, and as part of this strategic
vision will continue to launch innovative new treatments and products in beauty
salons. As the group is a marketing and sales organisation where brand
perceptions are critical, focus will shift to above the line marketing
activities.
The group will continue to open Placecol, Dreamnails & Body and World of Beauty
outlets in instances where appropriate franchise owners have been identified.
To ensure that individual franchised or corporate stores generate more revenue,
service and retail offerings are broadened.
The group is in the process of finalising its research for a loyalty programme
which will be launched in the near future.
This prospects statement has not been audited or reported on by the group`s
auditors.
CHANGES TO THE BOARD
Melinda Jacobs (CA(SA)) has been appointed as the Financial Director of the
group with effect from 1 January 2011.
SUBSEQUENT EVENTS
There are no subsequent events to report on.
DIVIDEND POLICY
The group will not pay a dividend for the 2011 year.
APPRECIATION
The directors would like to thank our staff for their extended efforts and our
clients for their support during the year.
By order of the Board
30 May 2011
E Colyn M Jacobs
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors: T J Schoeman* (Chairman); G S J van
Nieuwenhuizen*; M M Patel* (Chairman of Audit Committee); W P van
der Merwe
* Independent
Executive directors: E Colyn; M Jacobs
Registration number: 2003/025374/06
Registered address: Placecol Boulevard, Samrand Avenue,
Kosmosdal X4, Centurion 0157
Postal address: PO Box 8833, Centurion, 0046
Company secretary: Ithemba Governance and Statutory Solutions
(Pty) Limited
Telephone: (012) 621 3300
Facsimile: (012) 621 3369
Transfer secretaries: Computershare Investor Services 2004 (Pty)
Limited
Designated Adviser: Grindrod Bank Limited
Date: 30/05/2011 11:20:01 Supplied by www.sharenet.co.za
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