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IMBALIE BEAUTY LIMITED - Reviewed Group condensed interim financial results for the six months ended 31 August 2014

Release Date: 04/11/2014 17:40
Code(s): ILE     PDF:  
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Reviewed Group condensed interim financial results for the six months ended 31 August 2014

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 2014

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
                                                      Reviewed       Reviewed         Audited
                                                      6 months       6 months       12 months
                                                   August 2014    August 2013   February 2014
                                                         R’000          R’000           R’000
Revenue                                                 49 211         43 033          87 381
Cost of sales                                         (20 709)       (17 783)        (34 238)
Gross profit                                            28 502         25 250          53 143
Other income                                             1 001            985           1 121
Operating expenses                                    (29 692)       (22 878)        (49 786)
(Loss)/Earnings before
interest, taxation, depreciation
and amortisation                                         (189)          3 357           4 478
Depreciation and amortisation                            (488)          (422)           (854)
(Loss)/Profit before interest
and taxation                                             (677)          2 935           3 624
Investment revenue                                           -             15              39
Finance costs                                            (590)          (698)           (912)
(Loss)/Profit before taxation                          (1 267)          2 252           2 751
Taxation                                                   314          (464)           (558)
(Loss)/Profit for the period                             (953)          1 788           2 193
Other comprehensive income
Revaluation surplus                                          -              -               -
Total comprehensive
(loss)/income attributable to
ordinary shareholders                                    (953)          1 788           2 193

Reconciliation of headline
earnings:
(Loss)/Profit attributable to
ordinary shareholders                                    (953)          1 788           2 193
Adjusted for:
Loss on sale of property, plant
and equipment                                                -             19             144
Headline (loss)/earnings
attributable to ordinary
shareholders                                             (953)          1 807           2 337
Number of ordinary shares in issue on
which earnings per share are based
 - weighted and diluted average                    345 547 773    345 547 773     345 547 773
(Loss)/Earnings per share (cents)                       (0.28)           0.52            0.63
Headline (loss)/earnings per share
(cents)                                                 (0.28)           0.52            0.68
Fully diluted (loss)/earnings per share
(cents)                                                 (0.28)           0.52            0.63
Fully diluted headline (loss)/earnings
per share (cents)                                       (0.28)           0.52            0.68

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
                                                      Reviewed       Reviewed         Audited
                                                   August 2014    August 2013   February 2014
                                                         R’000          R’000           R’000
ASSETS
Non-current assets                                      36 820         36 345          36 108
Property, plant and equipment                            3 993          4 101           3 793
Goodwill and intangible assets                          22 763         22 397          22 566
Other financial assets                                       -            176               -
Deferred taxation                                       10 064          9 671           9 749 
Current assets                                          37 284         33 805          32 137
Inventories                                             17 804         16 879          19 789
Other financial assets                                   6 474          2 507           1 390
Current tax receivable                                       -             86              86
Trade and other receivables                             12 859         14 031          10 575
Cash and cash equivalents                                  147            302             297

Total assets                                            74 104         70 150          68 245

EQUITY AND LIABILITIES
Equity                                                  42 903         43 451          43 856
Share capital                                           67 330         67 330          67 330
Reserves                                                   163            163             163
Retained earnings                                     (24 590)       (24 042)        (23 637)
Non-current liabilities                                  9 171          7 308           5 893
Other financial liabilities                              8 935          7 243           5 657
Deferred taxation                                          236             65             236
Current liabilities                                     22 030         19 391          18 496
Trade and other payables                                13 225         10 249           9 615
Other financial liabilities                              4 913          4 888           4 212
Deposits and prepaid franchise fees
received                                                   893              -               -
Operating lease liabilities                                247            216             369
Bank overdraft                                           2 752          4 038           4 300

Total equity and liabilities                            74 104         70 150          68 245

Number of shares in issue at period end            345 547 773    345 547 773     345 547 773
Net asset value per share (cents)                        12.42          12.57           12.69
Net tangible asset value per share
(cents)                                                   5.83           6.10            6.16

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
                                                      Reviewed       Reviewed         Audited
                                                      6 months       6 months       12 months
                                                   August 2014    August 2013   February 2014
                                                         R’000          R’000           R’000
Balance at beginning of period                          43 856         41 663          41 663
Total comprehensive income for the period                (953)          1 788           2 193
Balance at end of period                                42 903         43 451          43 856

CONDENSED GROUP STATEMENT OF CASH FLOWS
                                                      Reviewed       Reviewed         Audited
                                                      6 months       6 months       12 months
                                                   August 2014    August 2013   February 2014
                                                         R’000          R’000           R’000
Cash flows generated from/(utilised in)
operating activities                                     3 431          (669)             498
Cash flows (utilised in)/generated from
investing activities                                   (6 013)             56             885
Cash flows generated from/(utilised
in)financing activities                                  3 980            467         (1 796)
Net increase/(decrease) in cash and cash
equivalents                                              1 398          (146)           (413)
Cash and cash equivalents at beginning of
period                                                 (4 003)        (3 590)         (3 590)
Cash and cash equivalents at end of period             (2 605)        (3 736)         (4 003)

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.

The Standard on Segment reporting will not be implemented as Imbalie Beauty has only one
segment.

OVERVIEW

The directors of Imbalie Beauty hereby present the reviewed interim results for the six months
ended 31 August 2014 (“interim period”). Imbalie Beauty is a franchisor, distributor and service
provider of beauty offerings and products. Imbalie Beauty has both its own distribution footprint
and a franchised distribution footprint, which together total 150 beauty salons nationally. In
addition, Imbalie Beauty’s products are distributed through other large retailers, independent
salons and pharmacies.

Imbalie Beauty is a multiple brand owner, owning the following franchise salon chains, Placecol
Skin Care Clinics; Dream Nails Beauty Salons; and Perfect 10 Nail and Body Studios.

The group experienced difficult trading conditions during the interim period as a result of its
exposure to a large retailer, that encountered difficult trading conditions which were well reported
on in the media. Furthermore, additional marketing and overheads were incurred to strengthen
the support structure for franchisees in advance of the opening of new salons.

The following positive achievements were encountered during the interim period:
• Three Franchise Association of South Africa(FASA) nominations as finalists and one award as a winner for Perfect 10 Ballito as Best Franchisee of the Year in April 2014;
• Launched mobile applications for all beauty franchise groups in April 2014, the first beauty franchisor to introduce this initiative;
• Opened of a new training centre in the Western Cape;
• A significant increase in marketing and advertising expenditure were incurred;
• Continuation of “Project Facelift” with more than 70 salons in the group being revamped and modernised to date;
• Opening of new beauty salons in new territories such as Stellenbosch, Secunda and Middelburg; and
• Two awards for BIOEFFECT EGF Eye Serum from the South African Pharmaceutical and Cosmetic Review in October 2014 as the 2014 Packaging Category Winner and the 2014 Individual Category Winner.

The group is in the final stages of the upgrade of its Placecol skin care range with the planned launch towards the end of 2014. The range will be classified as a dermaceutical skin care range
and will in future be manufactured by a strategic biotechnology partner. The upgraded skin care range will be of a high standard and will contain the “e” mark, to position the skin care range to be exported in future.

FINANCIAL RESULTS

Group revenue increased by 14.36% to R49.2 million (2013: R43.0 million) during the interim
period as a result of effective more focused marketing initiatives, the selling of seven new salons
and the selling of the new technology hair removal and skin rejuvenation machines. Gross profit
increased by 12.88% to R 28.5 million (2013: R25.3 million) and gross profit margins decreased
by 1% to 58% (2013: 59%), mainly due to the selling of corporate owned salons and equipment
which attract lower margins.

Operating expenses increased by 30% toR29.7 million (2013: R22.9 million) as a result of a 38%
increase in advertising and marketing expenses from the previous comparable period. Effective
marketing will remain the focus of management. Overhead structures were reassessed and
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
structures will be closely monitored for the remainder of the financial year.

Corporate stores available for resale are included in inventories. The value increased to R8.5
million due to salons being revamped and four salons being repurchased from franchisees. 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.

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 end of the interim
period,the settlement of which only occurred after the interim period end.

The group had no material capital commitments for the purchase of property, plant and
equipment as at 31 August 2014.

PROSPECTS

Imbalie Beauty foresees a bright future with the opening of more successful beauty salons, which
will create more job opportunities in South Africa. Imbalie Beauty has a strong pipeline for the
opening of new beauty salons in 2015. The group has since the interim period increased its
deposits and prepaid franchise fees received to R1.3 million, which is an indication that our
franchise business development strategy is gaining momentum.

Imbalie Beauty is on a continuous journey to innovate, offer better marketing, pricing and support
structures to its franchisees. New technology will be implemented during 2015 into the Group to
improve overall efficiencies and communication between the franchisor and franchisees.

Statements contained in this announcement, regarding the prospects of the group, have not
been reviewed or audited by the Group’s external auditors.

DIRECTORATE

GSJ Van Nieuwenhuizen resigned as a director of the Company on 6 February 2014. Ms P Tladi
was appointed as a director of the board on 1 April 2014. Ms Tladi was also appointed as member
of the AuditCommittee and as chairman of the Risk Committee.

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 2014. A copy of their unmodified review report 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 2014

Esna Colyn                            Melinda Malan
Chief Executive Officer               Financial Director

CORPORATE INFORMATION
Non-executive directors: HA Lunderstedt(Chairman); TJ Schoeman* (Lead Independent); P
Tladi*; 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

Date: 04/11/2014 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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