Wrap Text
Unaudited group condensed interim financial results for the six months ended 31 August 2017
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”)
UNAUDITED GROUP CONDENSED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2017
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Reviewed Audited
6 months 6 months 12 months
August 2017 August 2016 February 2017
R’000 R’000 R’000
Revenue 32 238 48 889 96 584
Cost of sales (13 992) (21 868) (40 607)
Gross profit 18 246 27 021 55 977
Other income 586 1 229 2 534
Impairment of corporate salons (8 462) (4 000) (9 860)
Operating expenses (24 218) (31 070) (66 350)
Loss before interest, taxation,
depreciation and amortisation (13 849) (6 820) (17 699)
Depreciation and amortisation (725) (725) (1 590)
Loss before interest and
taxation (14 574) (7 545) (19 289)
Investment revenue 129 19 33
Finance costs (953) (937) (1 505)
Loss before taxation (15 398) (8 463) (20 761)
Taxation 3 546 2 369 5 000
Loss for the period (11 851) (6 094) (15 761)
Other comprehensive income
Revaluation surplus - - 86
Total comprehensive loss for the
period (11 851) (6 094) (15 675)
Attributable to:
Equity holders of the company (11 851) (6 094) (15 675)
Loss per share attributable to equity
holders of the company (Note 1):
Basic loss per share (cents) (1.87) (0.97) (2.50)
Headline loss per share (cents) (1.87) (0.97) (2.50)
Diluted loss per share (cents) (1.87) (0.97) (2.52)
Diluted headline loss per share (cents) (1.87) (0.97) (2.52)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Reviewed Audited
August 2017 August 2016 February 2017
R’000 R’000 R’000
ASSETS
Non-current assets 66 212 45 841 62 985
Property, plant and equipment 16 183 3 170 16 192
Goodwill 6 809 6 809 6 809
Intangible assets 21 478 22 367 21 945
Other financial assets 2 568 509 1 580
Deferred taxation 19 174 12 986 16 459
Current assets 25 986 52 118 35 616
Inventories 10 935 33 543 22 556
Other financial assets 969 631 1 056
Trade and other receivables 13 366 17 665 11 650
Cash and cash equivalents 716 279 354
Non-current assets held for sale - - 1 900
Total assets 92 198 97 959 98 601
EQUITY AND LIABILITIES
Equity 44 393 64 947 55 740
Share capital 98 750 98 058 98 250
Reserves - - 86
Retained earnings (54 357) (33 111) (42 596)
Non-current liabilities 13 129 8 114 13 558
Other financial liabilities 13 129 8 114 12 723
Deferred taxation - - 835
Current liabilities 34 676 24 898 29 303
Trade and other payables 16 657 11 112 12 367
Other financial liabilities 12 325 8 107 11 657
Deposits and franchise fees received in
advance - 465
Operating lease liabilities 199 604 314
Bank overdraft 5 495 5 075 4 500
Total equity and liabilities 92 198 97 959 98 601
Number of shares in issue at period
end 634 039 225 629 872 558 629 872 558
Net asset value per share (cents) 6.99 15.55 8.85
Net tangible asset value per share
(cents) 2.53 5.68 4.28
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Reviewed Audited
6 months 6 months 12 months
August 2017 August 2016 February 2017
R’000 R’000 R’000
Balance at beginning of period 55 740 71 414 71 415
Loss for the period (11 851) (6 094) (15 761)
Fair value adjustment 4 (373) 86
Total comprehensive loss for the period 43 812 (6 467) (15 675)
General issue of shares 500 - -
Balance at end of period 44 393 64 947 55 740
CONDENSED GROUP STATEMENT OF CASH FLOWS
Unaudited Reviewed Audited
6 months 6 months 12 months
August 2017 August 2016 February 2017
R’000 R’000 R’000
Cash flows utilised in operating activities (704) (12 520) (4 991)
Cash flows utilised in investing activities (1 038) (1 298) (16 286)
Cash flows generated from financing
activities 1 109 4 671 12 780
Net decrease in cash and cash
equivalents (633) (9 147) (8 497)
Cash and cash equivalents at beginning of
period (4 146) 4 351 4 351
Cash and cash equivalents at end of
period (4 779) (4 796) (4 146)
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.
Notes to the financial information
1. Reconciliation of headline loss
Unaudited Reviewed Audited
6 months 6 months 12 months
August 2017 August 2016 February 2017
R’000 R’000 R’000
Loss attributable to ordinary
shareholders (11 852) (6 094) (15 761)
Adjusted for:
Profit on sale of property, plant and
equipment - - (68)
Loss on sale of non-current assets
held for sale - - 34
Tax effect on loss on sale of property,
plant and equipment - - 9
Headline loss attributable to ordinary
shareholders (11 852) (6 094) (15 786)
Weighted average shares in issue 634 039 225 629 872 558 629 872 558
Weighted average diluted shares in
issue 634 039 225 629 872 558 629 872 558
Basic loss per share (cents) (1.87) (0.97) (2.50)
Diluted loss per share (cents) (1.87) (0.97) (2.50)
Headline loss per share (cents) (1.87) (0.97) (2.52)
Diluted headline loss per share (cents) (1.87) (0.97) (2.52)
OVERVIEW
The directors of Imbalie Beauty hereby present the unaudited interim results for the six months
ended 31 August 2017 (“interim period”). 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 Imbalie Beauty Group’s unique differentiator is that it owns award-winning skin care, brands
being Placecol and Skinderm.
The period under review has been considered as one of the most challenging trading periods
that the Group has experienced with a significant tightening of purse of consumers and pressure
on the performance of underlying franchise beauty salons. Since January 2017 the Group was
involved in ongoing discussions with CAVI Brands (Pty) Limited relating to a potential transaction
to acquire shares in the Company’s underlying subsidiaries, which discussions were formally
terminated in September 2017. Ongoing tough market conditions lead to the closure and
impairment of the Group’s corporate salons held under inventories for resale.
The following measures were implemented subsequent to the interim period to ensure a
successful turnaround of the Group:
1. Internal restructuring of the Group and overall simplification of the operational structure which
include once off restructuring and impairment costs amounting to R9.0 million. The internal
restructuring process was finalised in September 2017 with benefits already evident in the
Group from October 2017.
2. Appointment of new board members and the overall restructuring of the board.
3. Weekly meetings with an advisory committee to ensure that the overall turn-around of the
business, further cost savings and strategic initiatives set for 2018 are achieved.
4. Announcement of a rights issue on 30 November 2017 to the amount of R15 million of which
R10 million is underwritten. The purpose of the rights issue is to fund the internal
restructuring of the group, strengthening of the balance sheet and the provision of ongoing
working capital requirements for the Group.
In August 2017 the Group entered into a strategic alliance with Edcon Limited to lead in the
market place with the opening of the first owner-operator beauty salon concept within Edgars,
called “Placecol on the go”. The first Placecol on the go beauty salon was opened in Edgars
Sandton City in October 2017, with the ultimate objective to allow franchise owner operators to
open a large number of “Placecol on the go” beauty salons nationally inside Edgars. In addition
to this the Group is in the process of completing the pilot phase for the use of the Edcon Account
Cards within its own beauty salon footprint to accommodate consumers by providing an
alternative payment method within the Group’s beauty salons.
Despite being confronted with tough trading conditions, the Group maintained its position as
leading and most desirable beauty and wellness franchise Group receiving many awards for its
beauty salons and own brands skin care ranges, as follows:
- FASA Awards 2017
Winner Franchisee of the Year Category: Placecol Elardus Park
Finalist in Franchisee of the Year Category: Perfect 10 Highveld Mall
Finalist in Franchisor Brand Builder of the Year Category: Perfect 10
- 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 2017
- 1st Runner up: Skinderm Exfoliating Glow Pads
- Pharmaceutical and Cosmetic Review Awards 2017
- Skinderm Range Category Winner
- Skinderm New Product Competition Second Runner Up
- Placecol Illuminé Retinol Serum Individual Category First Runner Up
- Best of Pretoria Awards 2017
- Placecol overall winner as best place to buy beauty products
- Placecol voted overall winner as best beauty salon
- Placecol voted overall winner as best nail bar
- Best of Bloemfontein Awards 2017
- Placecol Victorian Square voted as best place to buy beauty products
- Placecol Victorian Square voted as best beauty mecca
- Placecol Victorian Square voted as best nail salon
Through technology the Group has implemented a system to assist its underlying franchise
footprint with its ongoing working capital requirements, this system is currently undergoing
vigorous testing. The Group is in the process to improve the ordering and financial systems of
the Group which is expected to be finalised by 1 March 2018 in order to improve overall accuracy
of stock ordering and the movement of stock between beauty salons and the warehouse. The
Group will continue to invest in technology, ongoing innovation and education to ensure that the
Group’s brand positioning is maintained.
The Group owned 13 corporate salons at 31 August 2017, which are included under inventories,
the value of the corporate salons have been impaired and two of the salons were closed
subsequent to the interim period. Management will continue to focus on either closing or selling
these outlets for the remainder of the financial year to ensure that losses for the Group are limited.
FINANCIAL RESULTS
Group revenue decreased by 34% to R32.2 million (2016: R48.9 million) during the interim
period due to the Group:
- reducing its corporate salon footprint from 27 in the prior period to 13 lead to a reduction of
R6.9 million in Group revenue, with two corporate salons closing after the interim period and
one sold to a new franchise owner operator reducing this number to 10;
- a reduction in product sales as a result of the tougher trading conditions and the introduction
of new nail brands to replace and the simultaneous phasing out of a previous nail brand
distributed by Imbalie Beauty to offer our salon footprint a variety in colours and technology;
- opening of less new franchise salons during the interim period (subsequent to the interim
period four new salons were opened, Perfect 10 Mall of the North, Perfect 10 Cornubia,
Placecol on the go Sandton City and Placecol Whale Coast in Hermanus).
Gross profit decreased by 32% to R18.2 million (2016: R27.0 million) and gross profit margins
increased by 2.3% to 56.6% (2016: 55.3%), mainly due to the Group opening less franchise
salons during the interim period, which attracts 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 standardise a quality product offering to end consumers.
The following is a summary of the once-off costs included in the operating losses for the period
ending 31 August 2017:
R’000
Loss for the period before taxation (15 398)
- Legal fees 1 269
- Bad debts written off 621
- Retrenchment costs 567
- Impairment of corporate salons 8 462
Loss for the period before taxation adjusted for once off costs (4 479)
Operating expenses decreased by 21.9% to R24.2 million (2016: R31.1 million) as a result of
ongoing costs savings implemented within the Group. The Group returned to profitability in
October 2017.
As disclosed under the Post Balance Sheet events paragraph a rights offer was announced on
28 November 2017 which will strengthen the Group’s balance sheet and facilitate ongoing
working capital requirements of the Group.
PROSPECTS
Imbalie Beauty remains committed to go from strength to strength in the future, following the
upgrade of its skin care product ranges and its salon brands. The Group will in 2018 focus on
the profitability of its salon footprint with various strategies to increase footfall and retail in its
beauty salons and to monitor the profitability of its underlying franchise footprint. It is the intention
of the Group to open various Placecol on the go beauty salons within Edcon, once the pilot
project in Edgars Sandton City has been completed.
Imbalie Beauty remains steadfast on its journey to transform and empower women working in
our franchise salon footprint to ensure that these women are empowered as business owners
leading their teams and businesses successfully and achieving an overall return on
shareholders’ funds.
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 unaudited group condensed interim financial results 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 unaudited group condensed interim 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 unaudited group condensed interim financial results are consistent with those applied to the
Group summary financial results for the period ended 31 August 2016.
These unaudited group condensed interim financial results incorporate the financial results of
the Company and its subsidiaries.
The preparation of the unaudited group condensed interim financial results was supervised by
Imbalie Beauty’s Financial Director, Jaques Rossouw. The directors take full responsibility for
the preparation of the unaudited group condensed interim financial results, and for ensuring that
the financial and other information have been correctly extracted from the unaudited group
condensed interim financial results.
POST BALANCE SHEET EVENTS
On 30 November 2017 the Group announced a rights offer to raise R15 million, of which R10
million is underwritten.
The rationale for raising additional capital in terms of the rights offer for the Company is inter alia
as follows:
- to strengthen the balance sheet of Imbalie Beauty;
- to fund an internal restructuring of the Company; and
- to continue to fund the ongoing growth of the Group.
A circular containing details of the rights offer (including the form of instruction) will be posted to
shareholders in due course.
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.
DIVIDEND POLICY
No dividend has been declared for the interim period.
APPRECIATION
The directors would like to thank our management team and employees for their extended efforts,
as well as our clients, strategic partners and suppliers for their support during the period.
By order of the Board
30 November 2017
Esna Colyn Jaques Rossouw
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors: Bhekisisa Shongwe* (Chairman); Gary Harlow,* Theo Schoeman;*
Wessel van der Merwe, Debbie Wolfendale *Independent
Executive directors: Esna Colyn, Jaques Rossouw
Registration number: 2003/025374/06
Registered address: Imbalie Beauty Boulevard, 23 Saddle Drive, Woodmead, 2191
Postal address: PO Box 8833, Centurion, 0046
Company secretary: Paige Atkins
Telephone: (011) 086 9800
Transfer secretaries: Terbium Financial Services (Pty) Limited
Designated Adviser: Exchange Sponsors (2008) (Pty) Limited
Date: 30/11/2017 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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