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SKW - Skinwell - Audited Condensed Group Financial Results for the year ended
29 February 2012
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 29 FEBRUARY 2012
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
February 2012 February 2011
R`000 R`000
Revenue 61 888 56 572
Cost of sales (19 469) (16 830)
Gross profit 42 419 39 742
Other income 705 2 298
Operating expenses (38 362) (40 774)
Earnings before interest, taxation, 4 762 1 266
depreciation and amortisation
Depreciation and amortisation (856) (921)
Profit before interest and taxation 3 906 345
Investment revenue 403 974
Finance costs (1 214) (2 210)
Profit/(Loss) before taxation 3 095 (891)
Taxation (559) 379
Total comprehensive income/(loss) 2 536 (512)
attributable to ordinary shareholders
Reconciliation of headline
earnings/(loss):
Profit/(Loss) attributable to ordinary 2 536 (512)
shareholders
Adjusted for:
Loss on sale of property, plant and 19 150
equipment
Headline earnings/(loss) attributable 2 517 (362)
to ordinary shareholders
Number of ordinary shares in issue on
which earnings per share are based
weighted and diluted average 236 172 773 236 172 773
Earnings/(Loss) per share (cents) 1.07 (0.22)
Headline earnings/(loss) per share 1.07 (0.15)
(cents)
Diluted earnings/(loss) per share 1.07 (0.22)
(cents)
Diluted headline earnings/(loss) per 1.07 (0.15)
share (cents)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
February 2012 February 2011
R`000 R`000
ASSETS
Non-current assets 24 131 26 090
Property, plant and equipment 4 857 5 515
Goodwill and intangible assets 7 343 7 282
Other financial assets 780 1 436
Deferred taxation 11 151 11 857
Current assets 23 710 22 211
Inventories 12 659 11 680
Other financial assets 2 200 4 207
Current tax receivable 86 86
Trade and other receivables 8 612 6 144
Cash and cash equivalents 153 94
Total assets 47 841 48 301
EQUITY AND LIABILITIES
Equity 22 015 19 479
Share capital 49 830 49 830
Retained earnings (27 815) (30 351)
Non-current liabilities 3 786 4 292
Other financial liabilities 3 775 4 292
Deferred taxation 11 -
Current liabilities 22 040 24 530
Shareholders` loans 5 218 3 216
Trade and other payables 5 724 9 730
Other financial liabilities 5 813 6 133
Current tax payable 375 795
Finance and operating lease liabilities 218 352
Bank overdraft 4 692 4 304
Total equity and liabilities 47 841 48 301
Number of ordinary shares in issue at 236 172 773 236 172 773
year-end
Net asset value per share (cents) 9.32 8.25
Net tangible asset value per share 6.21 5.16
(cents)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Total share Accumulated Total
capital premium capital loss equity
R`000 R`000 R`000 R`000 R`000
Balance 1 24 49 806 49 830 (29 839) 19 991
March 2010
Total (512) (512)
comprehensive
loss for the
year
Total changes - - - (512) (512)
Balance 1 24 49 806 49 830 (30 351) 19 479
March 2011
Total 2 536 2 536
comprehensive
income for the
year
Total changes - - - 2 536 2 536
Balance 29 24 49 806 49 830 (27 815) 22 015
February 2012
CONDENSED STATEMENT OF CASH FLOWS
Audited Audited
February 2012 February 2011
R`000 R`000
Cash flows used in operating activities (3 764) (2 448)
Cash flows from investing activities 2 384 4 742
Cash flows from/(in) financing 1 051 (1 636)
activities
Net (decrease)/increase in cash and (329) 658
cash equivalents
Cash and cash equivalents at beginning (4 210) (4 868)
of period
Cash and cash equivalents at end of (4 539) (4 210)
period
SEGMENTAL REPORTING
The group determines and presents operating segments based on the information
that is internally provided to the Chief Executive Officer, who is the chief
operating decision maker.
A segment is a distinguishable component of the group that is engaged either in
providing related products or services (business segment), or in providing
products or services within a particular economic environment (geographical
segment), which is subject to risks and returns that are different from those of
the other segments.
The Standard on Segment reporting will not be implemented as Skinwell has only
one segment.
OVERVIEW
The directors of Skinwell herewith present the audited annual financial results
for the year ended 29 February 2012 ("the 2012 year" or "2012"). Skinwell is
mainly a franchisor, distributor and service provider of beauty offerings,
represented in its own and franchised distribution footprint of 148 beauty
salons nationally, other large retailers, independent salons and pharmacies.
On 6 March 2012, the company announced the acquisition of the Perfect 10
franchise chain ("Perfect 10 transaction") with 55 salons nationally, which is
detailed under the Subsequent Events paragraph. The announcement was made
simultaneous to Skinwell Holdings Limited launching its new name and brand,
notably that of "Imbalie Beauty". The word "Imbalie" is derived from the Zulu
word for flower. As such, it is appropriately symbolic of the group`s holistic
and comprehensive beauty offering which encompasses skincare, nail care, hair
care and various other beauty products and services.
The group will continue to be a multiple brand owner, owning Placecol skin care
clinics, Dream Nails Beauty salons, World of Beauty salons and Perfect 10
studios. Its vision is to become the largest and most desirable beauty
franchise company in South Africa, whilst its mission is to make a positive
change in the world through self-improvement, self-empowerment and increasing
the self-esteem of its customers.
The group experienced an increase in system-wide sales revenue (including gift
cards) for the 2012 year of 12.8% to R132 million (2011: R117 million) in
respect of its Placecol skin care clinics, Dream Nails Beauty salons and World
of Beauty salons.
Beauty care remains a priority for South African consumers. Consumers, however
remain very cautious and price-sensitive, and are anticipated to continue to be
prudent in the years ahead. Consumer focus has additionally shifted to beauty
maintenance products as compared to seasonal offerings. Consumers are
continuously trading down and are searching for promotional offerings.
Innovation and new product launches did, however, continue to stimulate consumer
interest in the market according to the Euromonitor International report
released in July 2010, Beauty and Personal Care - South Africa.
In December 2011 the group commenced with "Project Facelift" to improve the
overall appearance and trading densities of its existing salons. The focus of
the 2012 year was to obtain owner operator-managers for existing franchised
salons instead of opening new salons. The group additionally introduced new
innovative beauty products and services at competitive prices in 2012.
The group owned 15 corporate outlets at year end. These outlets are included
under inventories as they are available for resale. During 2013, the directors
will, focus on selling these outlets to potential owner operator franchisees.
The group has successfully strengthened its training team and will continue to
place emphasis on providing ongoing training to its employees and franchisees.
A definite highlight for the group was Placecol being voted as the Number 1
Beauty Salon in South Africa in the Beeld newspaper Readers Choice Awards. The
brand has received this accolade for two consecutive years (2010 and 2011).
FINANCIAL RESULTS
Group revenue increased by 9.4% to R61.9 million (2011: R56.6 million) during
the year as a result of increased marketing, the introduction of new brands and
increased royalty income earned. Gross profit increased by 6.7% to R42.4
million (2011: R39.7 million) and gross profit margins decreased by 1.7% to
68.5% (2011: 70.3%), due to the introduction of new brands and promotional
offerings distributed by the group to beauty salons, which attract lower
margins.
Operating expenses decreased by 6% to R38.4 million (2011: R40.8 million),
however marketing and advertising activities grew 80.5% compared to the previous
period. The cost savings are mainly as a result of effective overhead
structures being implemented which will be monitored closely to further enhance
cost savings. This will be an ongoing process.
Earnings before interest, taxation, depreciation and amortisation increased more
than 100% to R4.8 million (2011: R1.3 million). Profit attributable to ordinary
shareholders increased to R2.5 million (2011: loss of R0.5 million). Earnings
per share increased to 1.07 cents (2011: loss of 0.22 cents) and headline
earnings per share increased to 1.07 cents (2011: loss of 0.15 cents).
Corporate stores to the value of R4.8 million which are available for resale are
included in inventories. It will be a priority for 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 29 February 2012.
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 results are consistent with
those applied in the group`s annual financial results for the year ended 28
February 2011, and are in accordance with International Financial Reporting
Standards.
These condensed group annual financial results incorporate the financial results
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, Nexia SAB&T, have audited the condensed group annual financial
results for the year ended 29 February 2012. The auditors` unmodified audit
report is available for inspection at the company`s registered office.
SUBSEQUENT EVENTS
On 6 March 2012, the company announced the Perfect 10 transaction for a purchase
consideration of R14.35 million.
The rationale for the Perfect 10 transaction is inter alia as follows:
- the acquisition of Perfect 10 studios, with 55 salons nationally, secured
the group`s position as the largest and leading beauty franchise company in
South Africa with 148 beauty salons nationally;
- to take advantage of the synergies between the current salons in the group
and Perfect 10 through on-going training, marketing and advertising;
- being able to leverage national gift and loyalty card systems;
- to provide critical mass thereby enabling the group to negotiate better fee
structures from suppliers, financial institutions and landlords.
To fund the acquisition the company completed a general issue of shares for cash
whereby 109 375 000 ordinary shares were placed with a number of independent
public shareholders at a price of 16 cents per share raising R17.5 million ("the
general issue for cash").
The price for the general issue for cash was determined by the directors on 28
February 2012 based on a discount of 6% on the weighted average price of 16.96
cents for the 30-day period up to and including 27 February 2012. The general
issue for cash increases the number of shares in issue from 236 172 773 ordinary
shares to 345 547 773 ordinary shares. The general issue for cash was made in
terms of the general authority to issue shares for cash granted to the board by
shareholders at the annual general meeting held on 28 September 2011.
The company has also entered into a loan agreement, whereby the company secured
a R5 million three year term loan at an interest cost of 8% per annum. The
total amount of R22.5 million raised will be utilised to settle the purchase
consideration, repay other long term liabilities and to strengthen the company`s
balance sheet.
PROSPECTS
Despite comprising brands and franchises that are both well-established and
recognised in South Africa, Skinwell recognises the fact that its business
journey towards success and sustainability is an ongoing one. To achieve its
vision of becoming the largest and most desirable beauty franchise group in
South Africa, it has identified the following business goals or objectives for
2013:
- to become the most desirable beauty franchise group in South Africa;
- to expand the support structure for franchisees to ensure their
sustainability and profitability;
- to attract and retain world-class managers and beauty therapists,
technicians and hair stylists throughout the salon group; and
- to consistently introduce innovative beauty products and services.
All of these goals and objectives have been developed in line with Skinwell`s
mission of making a positive change in the world through self-improvement and
self-empowerment, and by increasing the self-esteem of its customers.
The management team will focus on the following in 2013:
- the ongoing consolidation and repositioning of existing brands;
- integration of the recent Perfect 10 acquisition;
- refreshing and refurbishing it salons in partnership with current franchise
owners;
- expanding its consumer-driven focus;
- continuously seeking out additional growth opportunities;
- aligning the purchasing and processing systems in use across all beauty
outlets; and
- strengthening the Imbalie Beauty Training Academy.
This prospects statement has not been audited or reported on by the group`s
auditors.
CHANGES TO THE BOARD OF DIRECTORS
Hilda Lunderstedt (B.Sc (Pharm)) was appointed as the Non-executive Chairman of
the Board on 3 May 2012.
Hilda Lunderstedt has over 10 years` experience in the health and wellness
industry. She recently sold her health and wellness business to a large
pharmaceutical player. This business had previously received the 2008 "Go for
Growth" award in recognition of its contribution to the industry. Hilda`s strong
entrepreneurial skills and flair will add to the current expertise within the
group. Her initial focus will be on enhancing Skinwell`s current marketing and
sales strategy, ensuring a customer-centric approach that is in line with market
trends.
Theo Schoeman will step down as the Independent Chairman and assume the role of
Lead Independent Non-Executive Director.
DIVIDEND POLICY
The group will not pay a dividend for the 2012 year.
APPRECIATION
The directors would like to thank our management team and staff for their
extended efforts and our clients for their support during the year.
By order of the Board
30 May 2012
E Colyn M Malan
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors:
HA Lunderstedt (Chairman); T J Schoeman* (Lead Independent); G S
J van Nieuwenhuizen*; M M Patel* (Chairman of Audit Committee); W
P van der Merwe
* Independent
Executive directors:
E Colyn; M Malan
Registration number: 2003/025374/06
Registered address:
Imbalie Beauty 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: 30/05/2012 07:05:10 Supplied by www.sharenet.co.za
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