Wrap Text
Reviewed group condensed interim financial results for the six months ended 31 August 2015
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”)
Strategic Highlights and Achievements
- 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 celebrates its 30th Anniversary in 2015, establishing it as
the oldest beauty franchise in South Africa.
REVIEWED GROUP CONDENSED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2015
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed Audited
6 months 6 months 12 months
August 2015 August 2014 February 2015
R’000 R’000 R’000
Revenue 48 012 49 211 91 886
Cost of sales (21 593) (20 709) (38 347)
Gross profit 26 419 28 502 53 539
Other income 1 097 1 001 1 976
Operating expenses (26 746) (29 692) (56 686)
Earnings/(Loss) before interest, taxation,
depreciation and amortisation 770 (189) (1 171)
Depreciation and amortisation (514) (488) (1 073)
Profit/(Loss) before interest and taxation 256 (677) (2 244)
Investment revenue - - 1
Finance costs (388) (590) (984)
Loss before taxation (132) (1 267) (3 227)
Taxation 37 314 826
Loss for the period (95) (953) (2 401)
Other comprehensive income
Revaluation surplus - - 244
Total comprehensive loss attributable to
ordinary shareholders (95) (953) (2 157)
Reconciliation of headline loss
adjusted for:
Loss attributable to ordinary shareholders (95) (953) (2 401)
Loss on sale of property, plant and
equipment 61
Tax effect on loss on sale of property, - - (17)
plant and equipment
Headline loss attributable to ordinary
shareholders (95) (953) (2 357)
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
Basic loss per share (cents) (0.03) (0.28) (0.69)
Headline loss per share (cents) (0.03) (0.28) (0.68)
Diluted loss per share (cents) (0.03) (0.28) (0.69)
Diluted headline loss per share (cents) (0.03) (0.28) (0.68)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
August 2015 August 2014 February 2015
R’000 R’000 R’000
ASSETS
Non-current assets 40 626 36 820 38 401
Property, plant and equipment 3 834 3 993 3 961
Goodwill 6 809 6 809 6 809
Intangible assets 19 664 15 954 17 003
Other financial assets - - 69
Deferred taxation 10 319 10 064 10 559
Current assets 41 848 37 284 35 555
Inventories 27 353 17 804 19 247
Other financial assets 386 6 474 4 367
Trade and other receivables 13 753 12 859 11 714
Cash and cash equivalents 356 147 227
Total assets 82 474 74 104 73 956
EQUITY AND LIABILITIES
Equity 41 604 42 903 41 699
Share capital 67 330 67 330 67 330
Reserves 407 163 407
Retained earnings (26 133) (24 590) (26 038)
Non-current liabilities 4 409 9 171 12 599
Other financial liabilities 4 409 8 935 12 323
Deferred taxation - 236 276
Current liabilities 36 461 22 030 19 658
Trade and other payables 13 003 13 225 11 076
Other financial liabilities 19 174 4 913 3 671
Deposits and franchise fees received in
advance 1 192 893 1 003
Operating lease liabilities 397 247 183
Bank overdraft 2 695 2 752 3 725
Total equity and liabilities 82 474 74 104 73 956
Number of shares in issue at period end 345 547 773 345 547 773 345 547 773
Net asset value per share (cents) 12.04 12.42 12.07
Net tangible asset value per share (cents) 4.38 5.83 5.18
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Audited
Reviewed Reviewed 12 months
6 months 6 months February
August 2015 August 2014 2015
R’000 R’000 R’000
Balance at beginning of period 41 699 43 856 43 856
Loss for the period (95) (953) (2 401)
Fair value adjustment - - 244
Total comprehensive loss for the period (95) (953) (2 157)
Balance at end of period 41 604 42 903 41 699
CONDENSED GROUP STATEMENT OF CASH FLOWS
Audited
Reviewed Reviewed 12 months
6 months 6 months February
August 2015 August 2014 2015
R’000 R’000 R’000
Cash flows (utilised)/generated from operating
activities (1 666) 3 431 598
Cash flows utilised in investing activities (5 203) (6 013) (6 218)
Cash flows generated from financing activities 8 028 3 980 6 125
Net increase in cash and cash equivalents 1 159 1 398 505
Cash and cash equivalents at beginning of
period (3 498) (4 003) (4003)
Cash and cash equivalents at end of period (2 339) (2 605) (3 498)
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 2015 (“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 160 beauty salons nationally. In
addition, Imbalie Beauty’s products are distributed through 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.
On 25 May 2015, the Imbalie Beauty group announced the acquisition of the business of Prana
Products (Pty) Limited (“Prana”) and the appointment of Debbie Wolfendale as an executive
director with effect from 1 June 2015. Debbie Wolfendale was a shareholder of Prana.
Debbie Wolfendale is in charge of the Sales, Marketing and Training divisions of Imbalie
Beauty. She has more than 27 years’ experience in the cosmetic and skin care industry and
has a passion and drive for quality beauty brands and to develop people. Her philosophy is to
build business through the success of others, creating business opportunities for female
entrepreneurs.
The main product and equipment brands of Prana which were incorporated into the Imbalie
Beauty stable are as follows:
- Beaute Pacifique, one of Prana's key brands is a dermaceutical which has been
developed by Flemming Christenson – scientific engineer and scientist in Denmark.
Measurement of results is a cornerstone of the Beaute Pacifique concept.
- Bodyography Professional make-up has become a leading source of products for some
of today's biggest names in make-up artistry.
- Dermascan equipment. An informative way to show you what is going on in the deeper
layers beneath your skin’s surface and how to get your skin to be “the healthiest skin
ever”.
- Beauty Blender. A make-up tool created by celebrity make-up artist Rea Ann Silva.
The acquisition of Prana facilitated the exit for the Imbalie Beauty group from Edcon and the
continued focus on its own vision, being the largest and most desirable beauty and wellness
franchise group. The exit from Edcon will be completed during the second half of the financial
year. Revenue decreased by 2.4% as a result of the group’s exit from Edcon. Increased
revenue has been achieved with the successful introduction of the Prana brands into the
Imbalie Beauty franchise group.
The Imbalie Beauty group received the following awards and nominations:
- FASA Awards
- Dream Nails Beauty Finalist Franchisee of the Year Category April 2015: Placecol
Silver Oaks.
- Finalist Brand Builder of the Year Category April 2015: Placecol.
- Beeld Awards
- Placecol voted as the favourite beauty salon by readers of Beeld in May 2015.
- Best of Bloemfontein Awards
- Placecol Skin Care Clinic Victorian Square voted as best nail salon in Bloemfontein in
October 2015.
- Best of Pretoria Awards
- Placecol product range voted as best pampering and beauty products in Pretoria in
October 2015.
- Placecol Skin Care Clinic Silver Oaks voted as best beauty salon in Pretoria in October
2015.
- Placecol Skin Care Clinic Silver Oaks voted as best nail salon in Pretoria in October
2015.
- Readers’ Choice Awards
- Dream Nails voted by The Star as the winner under the Best Nail Salon category in
November 2015.
- Perfect 10 Nail & Body Studio voted by Pretoria News as the winner under the Best
Nail Salon category in November 2015.
The following positive achievements were made by Imbalie Beauty during the interim period:
- Continuation of “Project Facelift” with more than 80 salons being revamped and
modernised to date;
- Opening of six new beauty salons during the interim period compared to five during the
comparative interim period; and
- The complete merger of the Prana brands into the Imbalie Beauty group and the
reshuffling of teams to ensure improved efficiencies and great support to the Imbalie
Beauty franchise owners.
Imbalie Beauty has now 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 and older than 40 years, during November 2014 and July 2015 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, six skin care ranges were collapsed into
two, 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.
The group owned 26 corporate salons during the interim period. Management will continue to
focus on selling these outlets to potential owner-operator franchisees.
FINANCIAL RESULTS
The group’s product revenue on own and exclusive brands (excluding Edcon revenue)
increased by 16% during the interim period. Group revenue decreased by 2.4% to R48.0
million (2014: R49.2 million) during the interim period due to the group’s strategic decision to
exit from the Edcon group in order to focus on its own beauty franchise group. Gross profit
decreased by 7.3% to R 26.4 million (2014: R28.5 million) and gross profit margins decreased
by 2.9% to 55.0% (2014: 57.9%), mainly due to the opening of new salons and the weakening
of the currency which had a negative effect on the margins of imported brands.
Operating expenses decreased by 9.9% to R26.7 million (2014: R29.7 million) as a result of
continued efforts by the management team to focus on costs savings. Effective marketing will
remain the focus of management. Overhead structures will remain in place to ensure that
Imbalie Beauty offers the best support to its franchisees.
Corporate stores available for resale are included in inventories. The value increased by
R7.6 million due to salons being revamped and eight corporate salons being repurchased from
franchisees to protect the group’s brand reputation. Two new corporate salons were opened in
strategic locations to increase brand awareness. 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 receivables increased during the interim period mainly as a result of the selling
of franchised salons and skin rejuvenation and hair removal machines prior to the interim
period with settlement after the interim period end.
Other financial liabilities relate inter alia to funding raised for the group during the previous
financial year to upgrade its Placecol skin care range, a 35 year old brand.
Intangible assets, equipment and stock increased by R1.7 million, R0.2 million and R0.5 million
respectively as a result of the Prana transaction which relate to trademarks, training material
and customer lists. Intangible assets also increased by R0.9 million as a result of the upgrade
of the Placecol skin care range.
The group had no material capital commitments for the purchase of property, plant and
equipment as at 31 August 2015.
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 continues to have a
strong pipeline for the opening of new beauty salons in 2016 and 2017.
A strategic decision has been taken by the management team of Imbalie Beauty to outsource
its warehousing and logistics function to a spesialised group to allow the management team to
focus on its core business being marketing, sales and education. The outsourcing of the
warehousing and logistics function will necessitate the group to consider the relocation from its
existing premises, which are in excess of 2 000 square metres to better suited premises.
Imbalie Beauty is excited to witness the roll out of the Prana brands, which are complementary
to existing brands and which are broadening the consumers offering, within the Imbalie Beauty
group. Imbalie Beauty is on a continuous journey to innovate, offer better marketing, pricing
and support structures to its franchisees.
Shareholders are advised that Imbalie Beauty has entered into Heads of Agreement on 3
November 2015 to acquire Curves Africa. Shareholders will be advised once the acquisition
agreements have been signed.
Curves Africa is the largest fitness and wellness group for women in Africa. Curves Africa has
87 franchised clubs across South Africa and has 9 franchised clubs in Nigeria, Botswana,
Namibia, Zambia and Zimbabwe. The transaction will give Imbalie Beauty strategic access
into the fitness and wellness arena in South Africa and Africa. The market trend is for
consumers to live longer and to look better, with wellness and beauty driving this category.
Imbalie Beauty identified wellness as an important growth area for consumers.
The transaction will become effective once various conditions precedent have been met, which
includes inter alia the entering into a new Master Franchise Agreement, entering into legal
agreements and the completion of a due diligence.
Imbalie Beauty is in the process of raising additional capital, the details of which will be
announced shortly. The additional capital will be utilised for the following purposes:
- to repay debt;
- to fund acquisitions; and
- for working capital purposes.
Statements contained in this announcement, regarding the prospects of the group, have not
been reviewed or audited by the group’s external auditors.
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 Wessel van der Merwe,
CA (SA).
POST BALANCE SHEET EVENTS
During the period under review the Prana acquisition was partially completed with certain
conditions only fulfilled after the 31 August 2015. Imbalie Beauty shares of 10 040 000 were
issued at an issue price of 16 cents per share during October 2015 to settle the vendor loan of
R1.6 million.
Imbalie Beauty has entered into a Heads of Agreement on 3 November 2015 to acquire Curves
Africa.
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 2015. 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 management team and staff for their extended efforts and
our partners and suppliers for their support during the period.
By order of the Board
27 November 2015
Esna Colyn Wessel 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; D L Wolfendale
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: 27/11/2015 12:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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