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Reviewed group condensed interim financial results for the six months ended 31 August 2013
IMBALIE BEAUTY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
JSE code: ILE
ISIN: ZAE000165239
("Imbalie Beauty” or “the company" or “the group”)
REVIEWED GROUP CONDENSED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2013
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R’000 R’000 R’000
Revenue 43 033 34 916 71 487
Cost of sales (17 783) (12 629) (27 653)
Gross profit 25 250 22 287 43 834
Other income 985 647 1 363
Operating expenses (22 878) (19 519) (40 237)
Earnings before interest, taxation,
depreciation and amortisation 3 357 3 415 4 960
Depreciation and amortisation (422) (412) (933)
Profit before interest and taxation 2 935 3 003 4 027
Investment revenue 15 57 70
Finance costs (698) (778) (1 080)
Profit before taxation 2 252 2 282 3 017
Taxation (464) (687) (1 032)
Profit for the period 1 788 1 595 1 985
Other comprehensive income
Revaluation surplus - - 163
Total comprehensive income
attributable to ordinary
shareholders 1 788 1 595 2 148
Reconciliation of headline
earnings:
Profit attributable to ordinary
shareholders 1 788 1 595 1985
Adjusted for: - - -
Loss on sale of property, plant and
equipment 19 - 7
Headline earnings attributable to 1 807 1 595 1 992
ordinary shareholders
Number of ordinary shares in issue on
which earnings per share are based
- weighted and diluted average 345 547 773 295 870 463 345 547 773
Earnings per share (cents) 0.52 0.54 0.57
Headline earnings per share (cents) 0.52 0.54 0.58
Fully diluted earnings per share
(cents) 0.52 0.54 0.57
Fully diluted headline earnings per
share (cents) 0.52 0.54 0.58
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
August 2013 August 2012 February 2013
R’000 R’000 R’000
ASSETS
Non-current assets 36 345 38 878 37 705
Property, plant and equipment 4 101 4 622 4 380
Goodwill and intangible assets 22 397 22 267 22 419
Other financial assets 176 1 536 770
Deferred taxation 9 671 10 453 10 136
Current assets 33 805 24 979 28 061
Inventories 16 879 13 592 15 562
Other financial assets 2 507 2 774 2 118
Current tax receivable 86 86 86
Trade and other receivables 14 031 8 339 9 960
Cash and cash equivalents 302 188 335
Total assets 70 150 63 857 65 766
EQUITY AND LIABILITIES
Equity 43 451 41 110 41 663
Share capital 67 330 67 330 67 330
Reserves 163 - 163
Retained earnings (24 042) (26 220) (25 830)
Non-current liabilities 7 308 8 948 8 461
Other financial liabilities 7 243 8 948 8 396
Deferred taxation 65 - 65
Current liabilities 19 391 13 799 15 642
Trade and other payables 10 249 5 944 8 217
Other financial liabilities 4 888 3 540 3 269
Current tax payable - 186 9
Operating lease liabilities 216 240 222
Bank overdraft 4 038 3 889 3 925
Total equity and liabilities 70 150 63 857 65 766
Number of shares in issue at period
end 345 547 773 345 547 773 345 547 773
Net asset value per share (cents) 12.57 11.89 12.06
Net tangible asset value per share
(cents) 6.10 5.45 5.57
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Reviewed Reviewed Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R’000 R’000 R’000
Balance at beginning of period 41 663 22 015 22 015
Changes in equity - 17 500 17 500
Other comprehensive income - - 163
Total comprehensive income for the period 1 788 1 595 1 985
Balance at end of period 43 451 41 110 41 663
CONDENSED GROUP STATEMENT OF CASH FLOWS
Reviewed Reviewed Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R’000 R’000 R’000
Cash flows (used)/from operating activities (669) 2 089 1 881
Cash flows from/(used) in investing
activities 56 (16 444) (901)
Cash flows from financing activities 467 15 193 (31)
Net (decrease)/increase in cash and cash
equivalents (146) 838 949
Cash and cash equivalents at beginning of
period (3 590) (4 539) (4 539)
Cash and cash equivalents at end of
period (3 736) (3 701) (3 590)
SEGMENTAL REPORTING
IFRS 8 requires an entity to report financial and descriptive information about its reportable
segments, which are operating segments or aggregations of operating segments that meet
specific criteria. Operating segments are components of an entity about which separate
financial information is available that is evaluated regularly by the chief operating decision
maker.
Therefore, the group determines and presents its operating segments based on the information
that is internally provided to the Chief Executive Officer, who is the chief operating decision
maker.
Furthermore, a segment is a distinguishable component of the group that is engaged either in
providing related products or services (business segment), 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 group does not have different operating segments. The business is conducted in South
Africa and is managed at a central head office with no branches. The group is managed as one
operating unit.
All revenues from external customers originate in South Africa, or from operations in South
Africa with branches in Africa.
OVERVIEW
The directors of Imbalie Beauty are pleased to present the reviewed interim results for the six
months ended 31 August 2013 (“interim period”). Imbalie Beauty is mainly a franchisor who
markets and distributes its own and independent health and beauty brands to its own
distribution footprint of more than 150 mainly franchised and owned beauty salons, large
retailers, independent beauty salons and selected pharmacies.
The group’s vision is to be the largest and most desirable Beauty Franchise Group. It has
three main salon brands namely Placecol Skin Care Clinics, Dream Nails Beauty Salons and
Perfect 10 Nail & Body Studios. Most of the hard work around the integration of the acquisition
of the Perfect 10 Nail & Body Studio chain (acquired in March 2012) has been finalised and the
group is in a position to grow its footprint to double the number of salons over the next three
years.
A significant improvement in trading conditions was experienced by the Imbalie Beauty group
from June 2013 onwards as a result of reaping the rewards from the repositioning of the salon
brands, significant marketing, ongoing training and the commitment of management towards
innovation.
Most importantly, system-wide sales revenue (including gift cards), for the six months ended 31
August 2013, grew by 18.26% to R117.2 million (2012: R99.1 million) through the group’s
franchise and corporate store system incorporating Placecol Skin Care Clinics, Dream Nails
Beauty salons, and Perfect 10 Nails & Body Studios. This can directly be attributed to better
marketing, ongoing training in the group (the Imbalie Beauty Training Academy trains on
average 200 salon owners, salon managers and employees per month), innovation within the
group and the continuation of “Project Facelift” (refer below).
The launch within the group of the BIOEFFECT product range from a Biotechnology company
in Iceland also proved to be very successful and contributed significantly towards salon
profitability during the interim period. Beauty care remains very important to South African
consumers, with consumers requesting visible results and value for money.
The following remained points of focus during the interim period:
1. Continuation of “Project Facelift” with more than 40 salons in the group being revamped
and modernised to date.
2. Continuation with our innovation drive with the introduction of state of the art hair
removal and skin rejuvenation technology into the Placecol Skin Care Clinics, as well as
the latest skin care products in skin rejuvenation, which will reposition these salons as
skin care clinics and increase barriers to entry.
3. The continued growth of the Imbalie Beauty Training Academy with the addition of more
trainers and provision of business and beauty training for franchisees and their staff on
a national basis.
4. Continued improvement of the systems in our Perfect 10 Nail & Body Studios.
The expansion of the independent Imbalie Beauty pension fund assists the group in living its
mission of empowering and improving the lives of the workforce, a new drive in the beauty
salon industry.
FINANCIAL RESULTS
Group revenue increased by 23.25% to R43.0 million (2012: R34.9 million) during the interim
period as a result of effective marketing, increased royalty income earned and the selling of the
new technology hair removal and skin rejuvenation machines. Gross profit increased by
13.29% to R25.3 million (2012: R22.3 million) and gross profit margins decreased by 7.8% to
59% (2012: 64%), mainly due to the selling of corporate owned salons and equipment which
attract lower margins.
Operating expenses increased by 17.21% to R22.9 million (2012: R19.5 million) as a result of a
49% increase in marketing expenses, as well as a result from the buyback of certain franchised
stores, from the previous comparable period. Effective marketing will remain the focus of
management. Overhead structures were strengthened during the interim period in order to
position Imbalie Beauty as the beauty franchisor that offers the best support to its franchisees.
The cost effectiveness of overhead cost structures will be closely monitored for the remainder
of the financial year.
Corporate stores which are available for resale are included in inventories. The value
increased to R8.2 million due to salons being revamped and salons being bought back from
franchisees. Two of these salons were sold to new franchisees subsequent to the interim
period. It remains a primary focus point of management to sell these stores to new franchisees
in order to strengthen the cash flow of the group. The profitability of the group’s corporate
stores improved during the interim period.
Trade and other payables increased during the interim period mainly as a result of the selling
of a further batch of skin rejuvenation and hair removal machines prior to the interim period, the
settlement of which only occurred after the interim period end.
Cash flow used from operations is mainly as a result of the successful launch of new products
through the group’s drive and commitment towards ongoing innovation, which required working
capital.
The group had no material capital commitments for the purchase of property, plant and
equipment as at 31 August 2013.
PROSPECTS
The group has managed to secure a significant pipeline of new franchise opportunities for 2014
and 2015, but will remain prudent when opening new stores to ensure that long-term
sustainable success is created. The Imbalie Beauty group will continue to seek growth
opportunities in line with our vision to be the largest and most desirable beauty franchisor in
South Africa.
The group will continue to focus on training of salon owners and staff members, providing post
development training to all salons to ensure standardisation and service excellence levels
across the various brands.
Notwithstanding positive financial results, Imbalie Beauty remains focused on training,
marketing and innovation as well as growing the number of franchised outlets over the next
financial period with the main objective of ensuring sustainable franchisee profitability.
DIRECTORATE
There were no changes to the board during the six month under review.
BASIS OF PREPARATION
The reviewed condensed interim financial results have been prepared in accordance with IAS
34 (Interim Financial Reporting) the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council, the Listings
Requirements of the JSE Limited and the requirements of the South African Companies Act.
The accounting policies used to prepare these condensed interim financial results are
consistent with those applied in the prior interim period and the previous year-end.
These condensed group interim financial statements were prepared by Melinda Malan,
CA(SA).
POST BALANCE SHEET EVENTS
There are no subsequent events to report on.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the going-concern basis as the directors have
every reason to believe that the company has adequate resources in place to continue in
operation for the foreseeable future.
AUDITORS' REVIEW CONCLUSION
The auditors, Nexia SAB&T, have reviewed these condensed group interim financial results for
the period ended 31 August 2013. A copy of their unmodified conclusion is available for
inspection at the company's registered office.
DIVIDEND POLICY
No dividend has been declared for the interim period.
APPRECIATION
The directors would like to thank our staff for their extended efforts and our partners for their
support during the period.
By order of the Board
4 November 2013
Esna Colyn Melinda Malan
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors: HA Lunderstedt (Chairman); TJ Schoeman* (Lead Independent); GSJ
van Nieuwenhuizen*; MM Patel* (Chairman of Audit Committee); WP van der Merwe
* Independent
Executive directors: E Colyn (Chief Executive Officer); M Malan (Financial Director)
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
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