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Audited Group Condensed Financial Results for the year ended 28 February 2015
IMBALIE BEAUTY LIMITED
"Imbalie Beauty” or “the Company” or “the Group”
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
JSE code: ILE
ISIN: ZAE000165239
Strategic Highlights and Achievements
- Acquisition of the business of Prana Products (Pty) Limited (“Prana Products”) and the
appointment of Debbie Wolfendale as Executive Director: Marketing, Sales and
Training with effect from 1 June 2015.
- The successful upgrade and relaunch of the Placecol skin care range in the market
place. Placecol's new dermaceutical skin care range is considered to be the “Best Skin
Care Product in South Africa”.
- Placecol skin care brand celebrates its 35th Anniversary in 2015.
- Dream Nails Beauty franchise group celebrates its 30th Anniversary in 2015,
establishing it as the oldest beauty franchise group in South Africa.
- FASA award winner “Franchisee of the Year Category” April 2014: Perfect 10 Ballito.
AUDITED GROUP CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2015
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
February 2015 February 2014
R’000 R’000
Revenue 91 886 87 381
Cost of sales (38 347) (34 238)
Gross profit 53 539 53 143
Other income 1 976 1 121
Operating expenses (56 686) (49 786)
(Loss)/Earnings before interest, taxation, depreciation
and amortisation (1 171) 4 478
Depreciation and amortisation (1 073) (854)
(Loss)/Profit before interest and taxation (2 244) 3 624
Investment revenue 1 39
Finance costs (984) (912)
(Loss)/Profit before taxation (3 227) 2 751
Taxation 826 (558)
(Loss)/Profit for the year (2 401) 2 193
Revaluation surplus net of taxation 244 -
Total comprehensive (loss)/income for the year (2 157) 2 193
Attributable to:
Equity holders of the company (2 157) 2 193
(Loss)/Earnings per share attributable to equity
holders of the company (Note 1):
Basic (loss)/earnings per share (cents) (0.69) 0.63
Headline (loss)/earnings per share (cents) (0.68) 0.68
Diluted (loss)/earnings per share (cents) (0.69) 0.63
Diluted (loss)/headline earnings per share (cents) (0.68) 0.68
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
February 2015 February 2014
R’000 R’000
ASSETS
Non-current assets 38 401 36 108
Property, plant and equipment 3 961 3 793
Goodwill 6 809 6 809
Intangible assets 17 003 15 757
Other financial assets 69 -
Deferred taxation 10 559 9 749
Current assets 35 555 32 137
Inventories 19 247 19 789
Other financial assets 4 367 1 390
Current tax receivable - 86
Trade and other receivables 11 714 10 575
Cash and cash equivalents 227 297
Total assets 73 956 68 245
EQUITY AND LIABILITIES
Equity 41 699 43 856
Share capital 67 330 67 330
Revaluation reserve 407 163
Accumulated loss (26 038) (23 637)
Non-current liabilities 12 599 5 893
Other financial liabilities 12 323 5 657
Deferred taxation 276 236
Current liabilities 19 658 18 496
Trade and other payables 11 076 9 615
Other financial liabilities 3 671 4 212
Deposits and franchise fees received in advance 1 003 -
Operating lease liabilities 183 369
Bank overdraft 3 725 4 300
Total equity and liabilities 73 956 68 245
Number of ordinary shares in issue at year-end 345 547 773 345 547 773
Net asset value per share (cents) 12.07 12.69
Net tangible asset value per share (cents) 5.18 6.16
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Total Revalua-
Share Share share tion Accumulated Total
capital premium capital reserve loss equity
R’000 R’000 R’000 R’000 R’000 R’000
Balance 1 March 2014 17 524 49 806 67 330 163 (23 637) 43 856
Loss for the year - - - - (2 401) (2 401)
Fair value adjustment - - - 244 - 244
Total comprehensive
(loss)/income for the year - - - 244 (2 401) (2 157)
Balance 28 February 2015 17 524 49 806 67 330 407 (26 038) 41 699
CONDENSED GROUP STATEMENT OF CASH FLOWS
Restated
(Note 2)
Audited Audited
February February
2015 2014
R’000 R’000
Cash flows generated from operating activities 598 1 996
Cash flows utilised in investing activities (6 218) (613)
Cash flows generated/(utilised in) from financing
activities 6 125 (1 796)
Net increase/(decrease) in cash and cash
equivalents 505 (413)
Cash and cash equivalents at beginning of the year (4 003) (3 590)
Cash and cash equivalents at end of the year (3 498) (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.
Notes to the financial information
1. Reconciliation of headline earnings
Audited Audited
February 2015 February 2014
R’000 R’000
(Loss)/Earnings attributable to ordinary shareholders (2 401) 2 193
Adjusted for:
Loss on sale of property, plant and equipment 61 200
Tax effect on loss on sale of property, plant and
equipment (17) (56)
Headline (loss)/ earnings attributable to ordinary
shareholders (2 357) 2 337
Weighted average shares in issue 345 547 773 345 547 773
Weighted average diluted shares in issue 345 547 773 345 547 773
Basic (loss)/earnings per share (cents) (0.69) 0.63
Diluted (loss)/earnings per share (cents) (0.69) 0.63
Headline (loss)/earnings per share (cents) (0.68) 0.68
Diluted headline (loss)/earnings per share (cents) (0.68) 0.68
2. Restated condensed Group statement of cash flows
Restated
Audited Audited
February February
2014 2014
R’000 R’000
Cash flows generated from operating activities 1 996 498
Cash flows (utilised in)/generated from investing
activities (613) 885
Cash flows utilised in financing activities (1 796) (1 796)
Net decrease in cash and cash equivalents (413) (413)
Cash and cash equivalents at beginning of the year (3 590) (3 590)
Cash and cash equivalents at end of the year (4 003) (4 003)
Loans to franchisees and students are considered to be a core part of the business
operations; cash flows relating to these financial assets have been reclassified from
investing to operating activities.
OVERVIEW
The directors of Imbalie Beauty herewith present the audited Group annual financial results
for the year ended 28 February 2015 (“the 2015 year” or “2015”). 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 almost 160 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 continued to experience difficult trading conditions during the second half of the
financial year mainly as a result of its exposure to a large retailer that encountered difficult
trading conditions. The Imbalie Beauty Group will remember the 2015 year as a year of
significant transformation, mainly relating to the upgrade and relaunch of its Placecol skin
care range. The success of the launch of this product range bodes very well for future
successful launches of own brands into its other franchise groups.
Imbalie Beauty has during May 2015 strengthened its management team with the acquisition
of the business of Prana Products and the appointment of Debbie Wolfendale as the
Executive Director: Marketing, Sales and Training of Imbalie Beauty. Debbie has more than
27 years experience in the cosmetic and skincare industry. The acquisition and appointment
will be effective from 1 June 2015.
Imbalie Beauty is proud to announce that the Group received the following awards and
nominations during 2015 and subsequent to year end as follows:
- FASA Awards
Winner Franchisee of the Year Category April 2014: Perfect 10 Ballito
Finalist in Franchisor of the Year Category April 2014: Dream Nails Beauty
Finalist Franchisee of the Year Category April 2015: Placecol Silver Oaks
Finalist Brand Builder of the Year Category April 2015: Placecol
- Elle Awards
Best product: Placecol AHA Exfoliating Cream
- Woman & Home Awards
Best product: Placecol Stimugenating Mask
Best Product: Empro Eyebrow Liner
- South African Pharmaceutical and Cosmetic Review Awards
Individual Category Winner October 2014: BIOEFFECT EGF Eye Serum
Packaging Category Winner October 2014: BIOEFFECT EGF Eye Serum
- Marie Claire SA Prix D'Excellence De La Beauté Awards
Best Care Product March 2015: BIOEFFECT EGF Eye Serum
- Beeld Awards
Placecol voted as the favourite beauty salon by readers of Beeld in May 2015
The following positive achievements were made by Imbalie Beauty during the year:
- Launched mobile applications for all beauty franchise groups during April 2014, the first
beauty franchisor to introduce this initiative;
- Opening 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 being revamped and
modernised to date;
- Opening of new beauty salons in new territories such as Stellenbosch, Secunda,
Middelburg and Vergelegen; and
- Introduced a concept to measure the customer experience in all beauty salons.
Imbalie Beauty successfully launched its upgraded Placecol skin care range (a 35 year old
skin care range combined with in salon treatments) in the consumer category for consumers
younger than 40 years old, during November 2014 into its Placecol skin care clinics.
The purpose and the outcome of the upgrade of the Placecol skin care range were as
follows:
- The manufacturing of the upgraded Placecol skin care range was moved to a new
strategic biotechnology manufacturer (not a contract manufacturer) that is ISO 9001 and
GMP approved.
- All Placecol product formulations were improved and the upgraded range is classified
as a dermaceutical skin care range, which works on the deeper layers of the skin.
- The upgraded Placecol product formulations are paraben and allergen free and include
many innovative active ingredients.
- As part of the upgrade and simplification process, five skin care ranges were collapsed
into one, with significant focus on the Placecol brand name. This will assist in the
training of the therapists and consumers understanding of which products are suitable
for them.
- The number of Stock Keeping Units were reduced.
- The upgraded Placecol skin care range is now considered to be a leading skin care
range in South Africa.
- The upgraded Placecol skin care range contains the “e” mark, to position the skin care
range to be exported in future.
Imbalie Beauty has also finalised the upgrade of the Placecol skin care category for
consumers older than 40 years and will launch this range during July 2015 (refer to the
prospects paragraph below).
During the 2015 year additional marketing and overheads were incurred and management
continued to strengthen the support structure for franchisees in advance of the opening of
new salons.
The Group owned 16 corporate outlets at year-end. Management will continue to focus on
selling these outlets to potential owner-operator franchisees.
FINANCIAL RESULTS
Group revenue only increased by 5% to R91.8 million (2014: R87.4 million) during the year
due to the Group’s exposure to a large retailer which encountered difficult trading conditions.
Gross profit has increased marginally to R53.5 million (2014: R53.1 million) and gross profit
margins decreased by 2.5% to 58.3% (2014: 60.8%), due to the Group commencing
distribution of various consumable type products to its franchise footprint, which attract lower
margins. It is the strategy of the Group over the short to medium term to distribute all
approved brands within salons to its franchisees in order to control and standardise the
product offering to consumers.
Operating expenses increased by 13.9% to R56.7 million (2014: R49.8 million), as a result of
increased marketing and advertising efforts, which grew by 37.9% compared to the prior
period and the repurchase of franchised stores from non-complying franchisees, which
resulted in an increase in turnover, salaries and rent. The Group incurred once-off
marketing costs to the amount of R820 000 relating to the relaunch of the Placecol skin care
range. Other once off costs to the amount of R735 000 were incurred relating to the
relocating of certain salons in the Group.
The Group’s decrease in earnings and headline earnings were due to the increase in
operating expenses, certain once-off marketing and relocation costs. Earnings per share
decreased to a loss of 0.69 cents (2014: earnings 0.63 cents) and the headline loss per
share was 0.68 cents (2014: earnings 0.68 cents).
The increase in intangible assets in the Statement of Financial Position to R17 million relate
to the costs of R1.2 million capitalised relating to the upgrade of the Placecol skin care
range. The Group raised funding of R9 million during the year to mainly fund the upgrade,
marketing and relaunch of the Placecol skin care range, to move to a new biotechnology
manufacturer and manage the working capital of the Group.
Other financial assets increased, which relate to the disposal of certain corporate salons
during the year.
Corporate outlets to the value of R8.6 million are included in inventories on the Statement of
Financial Position, which are available for resale. It remains a priority for management to
sell these outlets 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 2015.
BASIS OF PREPARATION
The audited Group condensed financial results for the year ended 28 February 2015
included in this announcement have been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards (“IFRS”), and have
been prepared in accordance with the presentation and disclosure requirements of IAS 34
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, and Financial 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 audited Group condensed financial results are prepared in accordance with the going
concern principle under the historical cost basis as modified by the fair value accounting of
certain assets and liabilities where required or permitted by IFRS.
The accounting policies and method of measurement and recognition applied in preparation
of the audited Group condensed financial results are consistent with those applied to the
audited Group condensed financial results for the year ended 28 February 2014.
These audited Group condensed financial results incorporate the financial results of the
company and its subsidiaries.
The preparation of the audited Group condensed financial results for the year ended 28
February 2015 was supervised by Imbalie Beauty’s Financial Director, Wessel van der
Merwe, CA (S.A.). The directors take full responsibility for the preparation of the audited
Group condensed financial results for the year ended 28 February 2015, and for ensuring
that the financial and other information have been correctly extracted from the audited
consolidated annual financial statements for the year ended 28 February 2015.
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
Nexia SAB&T, the Group’s independent auditor, has audited the consolidated annual
financial statements of Imbalie Beauty for the year ended 28 February 2015, and has
expressed an unmodified audit opinion thereon.
The audited Group condensed financial results for the year ended 28 February 2015 have
been derived from the audited consolidated annual financial statements.
The auditor’s report does not necessarily cover all information contained in this
announcement. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor’s work they should obtain a copy of the audit
report together with the accompanying consolidated annual financial statements from the
company’s registered office, where it is available for inspection.
SUBSEQUENT EVENTS
Shareholders are advised that Placecol Fresh Beauty (Pty) Ltd, a 100% subsidiary of Imbalie
Beauty has on 22 May 2015 agreed to acquire the business and assets of Prana Products.
Debbie Wolfendale the Managing Director of Prana Products will become the Executive
Director: Sales, Marketing and Training of Imbalie Beauty. Debbie Wolfendale has more
than 27 years’ experience in the cosmetic and skincare industry. She has a passion and
drive for people and beauty products.
Prana Products originated five years’ ago with the vision of creating an environment where
potential business women are encouraged, empowered and enabled to grow and reach their
full potential in both a business and personal capacity.
Prana Products is an importer and distributor of chosen brands. The strengths of Prana
Products can significantly be deployed on the Imbalie Beauty platform.
PROSPECTS
Imbalie Beauty remains optimistic about the future, following the strengthening of its
management team, the relaunch of its Placecol skin care range and with the continued
opening of more successful beauty salons, which will create more job opportunities in South
Africa. Imbalie Beauty has already opened and relocated more new beauty salons during
the first three months of the financial year compared to 2015.
Imbalie Beauty is on a continuous journey to innovate, offer better marketing, pricing and
support structures to its franchisees.
Statements contained in this announcement, regarding the prospects of the Group, have not
been reviewed or audited by the Group’s external auditors.
CHANGES TO THE BOARD OF DIRECTORS
- Ms Hilda Lunderstedt resigned as director and chairman of the board of Imbalie Beauty
with effect from 30 April 2015.
- Ms Melinda Malan resigned as Financial Director with effect from 30 April 2015.
- Mr Wessel van der Merwe’s role changed from 30 April 2015, from non-executive to
executive director acting as Corporate Strategy Director and he has now also taken
over the role as Financial Director.
- Ms Debbie Wolfendale has been appointed as Executive Director: Marketing, Sales
and Training with effect from 1 June 2015.
- Mr Mitesh Patel will become the new Chairman of the Board with effect from 29 May
2015. The composition of the various committees will be as follows:
- Social and Ethics Committee: Ms Pumla Tladi (Chairman), Ms Esna Colyn, Mr
Wessel van der Merwe and Ms Debbie Wolfendale.
- Remuneration and Nominations Committee: Mr Theo Schoeman (Chairman of
Remuneration Committee), Mr Mitesh Patel (Chairman of Nomination Committee)
and Ms Pumla Tladi.
- Audit and Risk Committees have combined into one committee: Mr Theo
Schoeman (Chairman), Mr Mitesh Patel and Ms Pumla Tladi.
DIVIDEND POLICY
The Group will not pay a dividend for the 2015 year.
APPRECIATION
The directors would like to thank our management team, staff for their extended efforts and
our clients, strategic partners and suppliers for their support during the year.
By order of the Board
29 May 2015
E Colyn W P van Der Merwe
Chief Executive Officer Financial and Corporate Strategy Director
CORPORATE INFORMATION
Non-executive directors: M M Patel* (Chairman); T J Schoeman;* P Tladi* *Independent
Executive directors: E Colyn; W P van der Merwe
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: Exchange Sponsors (2008) (Pty) Limited
Date: 29/05/2015 04:04:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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