Wrap Text
Reviewed Provisional Condensed Consolidated Financial Statements for The Year Ended 28 February 2017
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
REVIEWED PROVISIONAL CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
February 2017 February 2016
R’000 R’000
Revenue 96 584 101 111
Cost of sales (40 607) (41 906)
Gross profit 55 977 59 205
Other income 2 534 2 799
Operating expenses (76 210) (62 039)
Loss before interest, taxation, depreciation and
amortisation (17 699) (35)
Depreciation and amortisation (1 590) (1 144)
Loss before interest and taxation (19 289) (1 179)
Investment revenue 33 1
Finance costs (1 505) (343)
Loss before taxation (20 761) (1 521)
Taxation 5 000 395
Loss for the year (15 761) (1 126)
Revaluation surplus net of taxation 86 (78)
Total comprehensive loss for the year (15 675) (1 204)
Attributable to:
Equity holders of the company (15 675) (1 204)
Loss per share attributable to equity holders of the
company (Note 1):
Basic loss per share (cents) (2.50) (0.29)
Headline loss per share (cents) (2.50) (0.29)
Diluted loss per share (cents) (2.52) (0.29)
Diluted headline loss per share (cents) (2.52) (0.29)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
February 2017 February 2016
R’000 R’000
ASSETS
Non-current assets 62 985 41 694
Property, plant and equipment 16 192 2 544
Goodwill 6 809 6 809
Intangible assets 21 945 20 555
Other financial assets 1 580 -
Deferred taxation 16 459 11 786
Current assets 35 616 56 161
Inventories 22 556 36 375
Other financial assets 1 056 884
Trade and other receivables 11 650 14 551
Cash and cash equivalents 354 4 351
Non-current assets held for sale - 1 900
Total assets 98 601 99 755
EQUITY AND LIABILITIES
Equity 55 740 71 414
Share capital 98 250 98 250
Revaluation reserve 86 329
Accumulated loss (42 596) (27 165)
Non-current liabilities 13 558 7 804
Other financial liabilities 12 723 6 718
Deferred taxation 835 1 086
Current liabilities 29 303 20 537
Trade and other payables 12 367 14 357
Other financial liabilities 11 657 4 882
Deposits and franchise fees received in advance 465 719
Operating lease liabilities 314 578
Bank overdraft 4 500 1
Total equity and liabilities 98 601 99 755
Number of ordinary shares in issue at year-end 629 872 558 629 872 558
Net asset value per share (cents) 8.85 11.34
Net tangible asset value per share (cents) 4.28 6.99
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total Revalua-
Share Share share tion Accumulated Total
capital premium capitalR’0 reserve loss equity
R’000 R’000 00 R’000 R’000 R’000
Balance 1 March 2016 52 044 46 206 98 250 329 (27 165) 71 415
Loss for the year - - - - (15 761) (15 761)
Revaluation of property - - - 86 - 86
Total comprehensive
income/loss for the year - - - 86 (15 761) (15 675)
Sale of properties (329) 329 -
Balance 28 February 2017 52 044 46 206 98 250 86 (42 596) 55 740
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
February 2017 February 2016
R’000 R’000
Cash flow from operating activities
Cash generated from / (utilised in) operations 6 341 (12 601)
Investment revenue 33 1
Finance costs (1 505) (343)
Write down of corporate stores to net realisable value (9 860) -
Cash flows utilised in operating activities (4 991) (12 943)
Cash flows from investing activities
Purchase of property, plant and equipment (14 461) (1 265)
Proceeds from disposal of property, plant and
equipment 190 21
Proceeds from disposal of disposal group 1 900 -
Purchase of intangible assets (2 163) (2 440)
Business combinations - (2 114)
Advance in financial assets (2 274) (362)
Receipt from financial assets 522 427
Cash flows utilised in investing activities (16 286) (5 733)
Cash flows from financing activities
Proceeds from share issue - 30 920
Repayment of other financial liabilities (899) (19 993)
Proceeds from other financial liabilities 13 679 15 598
Cash flows from financing activities 12 780 26 525
Net (decrease) / increase in cash and cash
equivalents (8 497) 7 849
Cash and cash equivalents at beginning of the year 4 351 (3 498)
Cash and cash equivalents at end of the year (4 146) 4 351
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 loss
Reviewed Audited
February 2017 February 2016
R’000 R’000
Loss attributable to ordinary shareholders (15 761) (1 126)
Adjusted for:
Profit on sale of property, plant and equipment (68) 11
Loss on sale of non-current assets held for sale 34
Tax effect on loss on sale of property, plant and
equipment 9 (3)
Headline loss attributable to ordinary shareholders (15 786) (1 118)
Weighted average shares in issue 629 872 558 389 600 268
Weighted average diluted shares in issue 629 872 558 389 600 268
Basic loss per share (cents) (2.50) (0.29)
Diluted loss per share (cents) (2.50) (0.29)
Headline loss per share (cents) (2.52) (0.29)
Diluted headline loss per share (cents) (2.52) (0.29)
OVERVIEW
The directors of Imbalie Beauty herewith present the Group annual financial results for the
year ended 28 February 2017 (“the 2017 year” or “2017”). Imbalie Beauty is a franchisor,
brand owner, service provider and an educator of beauty and wellness offerings and
products. Imbalie Beauty has its own and franchise salon footprint (“salon footprint”) through
the following franchise salon chains: Placecol Skin Care Clinics; Dream Nails Beauty Salons;
and Perfect 10 Nail and Body Studios.
The 2017 year will be remembered as a year where the group went through significant
change and transformation to position the group for future growth. The table below provides
an outline of actions taken by the Group to reposition itself as well as detail of once-off
expenses incurred by the Group to provide context to the losses incurred during the year:
Action Impact on
losses before
taxation
R’000
- Additional overheads incurred with the establishment of the new
Imbalie Beauty Training Academy (offering 34 modular courses in
beauty and wellness) in Woodmead, Johannesburg which received
ITEC and Seta accreditation in record time. This division was
strengthened after year end by the collaboration with an existing
partner of the Group to establish the Imbalie Beauty Training
Academy in the Western Cape. 1 500
- Outsourcing of the Group’s distribution function which was coupled
with retrenchment costs. 650
- Marketing costs associated with the launch of the Skinderm skin
care range (an extension to the Scinderm medical range). 2 187
- Opening of two new Placecol Aesthetic Clinics to primarily assist the
Placecol brand to be elevated in the eyes of the consumer. 455
- Additional legal fees incurred on an arbitration matter where the
Group did not receive a favourable award, contrary to legal advice,
relating to an external Information Technology system that was
developed for the Group to improve overall marketing and
communication in its franchise system. 1 574
- An impairment of R9.9 million made against corporate salons. The
losses incurred by the corporate salons at Group level amounted to
9 860
R1.4 million during the year.
1 407
Total impact on losses before taxation 17 633
Imbalie Beauty is proud to announce that the Group received the following awards and
nominations during 2017 and subsequent to year end as follows:
- FASA Awards
Winner Franchisee of the Year Category April 2016: Placecol 10 Elardus Park
Finalist in Franchisor of the Year Category April 2016: Perfect 10 Highveld Mall
- Elle Awards
Best product: Placecol Illuminé Firming Masque
- Pharmaceutical and Cosmetic Review Awards
- Placecol Illuminé voted overall winning skin care range in 2016
- Placecol Illuminé voted top skin care range in 2016
- Best of Pretoria Awards
- Placecol voted as best place to buy beauty products in Pretoria in October 2016.
- Placecol voted as best beauty mecca in Pretoria in October 2016.
- Placecol Skin Care Clinic Silver Oaks voted as best beauty salon in Pretoria in
October 2016.
- Placecol Skin Care Clinic The Grove voted as best nail salon in Pretoria in October
2016.
- Best of Bloemfontein Awards
- Placecol voted as best place to buy beauty products in Bloemfontein in October
2016.
- Placecol voted as best beauty mecca in Bloemfontein in October 2016
- Placecol Skin Care Clinic Victorian Square voted as best nail salon in Bloemfontein in
October 2016.
- Woman & Home Awards 2017
- Best Face Oil: Placecol Illuminé Reviving Oil
- Best New Skin Care Product: Skinderm Optimize Brightening Elixir
- Best Lip Pencil: Bodyography Lip Pencil in Barely There
Marie Claire Prix D’Excellence de la Beauté
- 2nd Runner up: Placecol Illuminé Retinol Serum
The support structures implemented over the last couple of years are adequate to provide
great support to the Group’s salon footprint and technology has been introduced to take this
support for franchisees to the next level, which is required for sustainability and to create
brand equity.
FINANCIAL RESULTS
Group revenue decreased by 4.5% to R96.5 million (2016: R101.1 million) mainly as a result
of 7 new franchised salons opening during the financial year in comparison to 16 during the
2016 financial year. Gross profit has decreased by 5.4% to R56.0 million (2016:
R59.2 million) and gross profit margins decreased marginally to 57.9% (2016: 58.5%), due to
the Group commencing distribution of various brands to its franchise footprint that attract
lower margins. It is the strategy of the Group to distribute only approved brands in order to
standardise a quality product offering to consumers.
Operating expenses include various once-off costs such as the impairment of corporate
salons of R9.9 million; legal fees of R1.5 million; retrenchment costs due to the outsourcing
of its warehousing and distribution function of R650k; as well as the establishment of the
new Imbalie Beauty Training Academy of R1.5 million; and additional marketing fees to
launch the Skinderm skin care range to the amount of R2.1 million. Once these items listed
are eliminated from operating expenses, operating expenses decreased by 1.3% to
R61.2 million (2016: R62.0 million), as a result of cost savings achieved by the group
relocating to a more affordable head office and the ongoing efforts of the management team
to reduce overheads.
Loss per share increased to a loss of 2.52 cents (2016: loss of 0.29 cents) and the headline
loss per share was 2.51 cents (2015: loss 0.29 cents).
Property, plant and equipment increased to R16.1 million due to the acquisition by the Group
of its own building during the 2017 year.
The increase in intangible assets in the Summary Statement of Financial Position to
R21.9 million relate to the following:
- establishment costs incurred prior to the opening of the Imbalie Beauty Academy in
Woodmead; and
- the upgrade and launch of the Skinderm skin care range for the Perfect 10 franchise
group.
Inventory decreased to R22.5 million of which R9.9 million relates to the Groups’ own beauty
salons against which an impairment of R9.9 million was made. Product inventories
distributed to beauty salons decreased by R3.0 million due to more effective stock
management.
Other long-term and short-term financial liabilities increased with the R8.5 million which
relate to the bond obtained to purchase the property in Woodmead and R6 million included
short-term financial liabilities received in bridging facilities to fund the ongoing working
capital requirements of the Group.
The Group had no material capital commitments for the purchase of property, plant and
equipment as at 28 February 2017.
BASIS OF PREPARATION
The condensed consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for provisional reports and the
requirements of the Companies Act of South Africa. The Listings Requirements require
provisional reports to be prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting. The accounting policies applied in the preparation of the condensed
consolidated financial statements are in terms of IFRS and are consistent with those applied
in the previous consolidated annual financial statements
The provisional condensed consolidated financial statements are prepared in accordance
with the going concern principle under the historical cost basis as modified by the fair value
accounting of certain assets where required or permitted by IFRS.
These provisional condensed consolidated financial statements incorporate the financial
results of the company and its subsidiaries.
The preparation of the provisional condensed consolidated financial statements for the year
ended 28 February 2017 was supervised by Imbalie Beauty’s Financial Director, Jarryd
Prince, CA (S.A.). The directors take full responsibility for the preparation of these
provisional condensed consolidated financial statements for the year ended 28 February
2017.
These condensed consolidated financial statements for the year ended 28 February 2017
have been reviewed by Nexia SAB&T, who expressed an unmodified review conclusion. The
auditor’s report contained the following Emphasis of Matter paragraph:
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
We draw attention to the statement of going concern paragraph of the condensed
consolidated financial statements contained in the accompanying provisional report. The
ability of the Group to fund short term operations in the foreseeable future is largely
dependent on the ability of the directors to arrange for working capital funding and the
realisation of the income from potential expansion opportunities as more fully described in
the note pertaining to going concern. These conditions, along with the matters set forth in the
notes to the condensed consolidated financial statements, indicate that a material
uncertainty exists that may cast significant doubt on the group’s ability to continue as a going
concern. Our conclusion is not modified in respect of this matter.
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.
While management are aware of the cash-flow pressures and significant liquidity uncertainty
at year-end, they continue to assess the situation as one whereby the group is able to
service its debts that will become due in the next 12 months and also fund operational losses
that may arise. Management has developed, and is in the process of a strategy to address
the liquidity and cash flow constraints - which includes:
- A potential to tap into the current mortgage bond facility which has approximate
drawdown potential of R5 million.
- The Group is in strategic conversations with a partner, to develop an express salon
concept which will increase overall brand awareness.
- The Group is ready to introduce exports with one of its previous trading partners.
Management is confident that the implementation of the above strategic interventions will
improve and address the sales, profitability, liquidity and the cash flow position of the Group
over the next twelve months.
SUBSEQUENT EVENTS
The company concluded an issue of shares subsequent to year end whereby 4 166 666
were issued in terms of the conclusion of the Scinderm transaction.
PROSPECTS
Imbalie Beauty remains optimistic about the future, following the continued strengthening of
its management team in Education and Marketing. The Group will continue to focus on the
continued opening of more successful beauty salons and the disposing of its corporate
salons.
Imbalie Beauty remains steadfast on its journey to transform and empower women working
in our Group, to upgrade its existing product offering and 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.
DIVIDEND POLICY
The Group will not pay a dividend for the 2017 year.
CONTINGENCIES
The directors are not aware of any material contingent liability which existed at the reporting
date and up to the date of this report requiring disclosure.
FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which
the inputs to the fair value measurements are observable and the significance of the inputs
to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
The Group only carries land and buildings and non-current assets held for sale at revalued
amounts.
Assets measured at fair Carrying amounts Fair value
value
29 February 28 February 29 February 28 February
2016 2017 2016 2017
Land and buildings - 13 383 988 - 13 500 000
Non-current assets held 1 500 000 - 1 900 000 -
for sale
1 500 000 13 383 988 1 900 000 13 500 000
Assets measured at fair Balance Transfer in/out of Closing balance
value account balance
Land and buildings 13 500 000 - 13 500 000
(Level 2)
Non-current assets held - - -
for sale (Level 3)
Type Valuation technique
Land and buildings The fair value of land and buildings is determined by
applying the income approach valuation technique,
which incorporates the determination of discount
rate containing an appropriate risk premium.
The carrying amount of all significant financial instruments approximates the fair value.
WRITE DOWN OF CORPORATE SALONS
The Group’s strategy is to focus on its vision which is to be the leading and most desirable
beauty and wellness franchise group. The Group therefore during the 2017 year focused on
selling its corporate salons to prospective owner-operators as it is proven that the franchise
model is more successful when the franchise is managed by an owner-operator. This
allowed the Group to reduce its corporate salons from 27 to 15 at year end. The remaining
corporate salons at year end were each evaluated and a clear strategy to manage these
remaining corporate salons was implemented by the management team. The profitability,
the remainder of the lease agreement coupled with the price that a potential buyer would pay
for the business were factors considered in determining the fair value adjustment of the
corporate salons. The adjustment resulted in an impairment of R9.9 million of corporate
salons.
FINANCIAL RISK MANAGEMENT
The Group's financial risk management objectives and policies are consistent with those
disclosed in the consolidated annual financial statements as at and for the year ended 28
February 2016.
BOARD CHANGES
Mr. Jarryd Prince was appointed as financial director of the Group with effect from 27 March
2017; and Mr. Wessel van der Merwe’s role changed with effect from 27 March 2017 from
finance and corporate strategy director to a non-executive director.
APPRECIATION
The directors would like to thank the team, customers, strategic partners and suppliers for
their continued support during the year.
By order of the Board
1 June 2017
E Colyn J Prince
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors: M M Patel* (Chairman); W P van der Merwe; T J Schoeman;* P Tladi*
*Independent
Executive directors: E Colyn; D Wolfendale; J Prince
Registration number: 2003/025374/06
Registered address: Imbalie Beauty Boulevard, 23 Saddle Drive, Woodmead, 2191
Postal address: PO Box 8833, Centurion, 0046
Company secretary: Arenkwe Governance Services CC
Telephone: (011) 086 9800
Transfer secretaries: Trifecta Capital Investor Service (Pty) Limited
Designated Adviser: Exchange Sponsors (2008) (Pty) Limited
Date: 01/06/2017 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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