Wrap Text
Unaudited group condensed interim financial results for the six months ended 31 August 2018
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 2018
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2018 August 2017 February 2018
R’000 R’000 R’000
Revenue 22 410 32 238 61 291
Cost of sales (7 512) (13 992) (26 272)
Gross profit 14 898 18 246 35 019
Other income 19 586 1 963
Operating expenses (16 132) (24 218) (46 531)
Impairment of corporate salons - (8 462) (8 630)
Impairment of intangible assets - - (6 644)
Impairment of goodwill - - (3 249)
Impairment of other financial assets - - (1 431)
Loss before interest, taxation,
depreciation and amortisation (1 215) (13 848) (29 503)
Depreciation and amortisation (364) (725) (1 829)
Loss before interest and taxation (1 579) (14 573) (31 332)
Investment revenue - 129 1
Finance costs (971) (953) (2 253)
Loss before taxation (2 550) (15 397) (33 584)
Taxation 720 3 546 6 605
Loss for the period (1 830) (11 851) (26 979)
Other comprehensive income
Revaluation surplus net of taxation - - 725
Total comprehensive loss for the
period (1 830) (11 851) (26 254)
Attributable to:
Equity holders of the company (1 830) (11 851) (26 254)
Loss per share attributable to equity
holders of the company (Note 1):
Basic loss per share (cents) (0.13) (1.87) (4.24)
Headline loss per share (cents) (0.13) (1.87) (2.98)
Diluted loss per share (cents) (0.13) (1.87) (4.24)
Diluted headline loss per share (cents) (0.13) (1.87) (2.98)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
August 2018 August 2017 February 2018
R’000 R’000 R’000
ASSETS
Non-current assets 56 939 66 212 57 228
Property, plant and equipment 16 392 16 183 16 720
Goodwill 3 560 6 809 3 560
Intangible assets 14 312 21 478 14 312
Other financial assets - 2 568 342
Deferred taxation 22 675 19 174 22 294
Current assets 20 370 25 986 22 216
Inventories 6 656 10 935 8 014
Other financial assets 998 969 843
Trade and other receivables 12 686 13 366 11 936
Cash and cash equivalents 30 716 1 423
Total assets 77 309 92 198 79 444
EQUITY AND LIABILITIES
Equity 43 156 44 393 41 652
Share capital 113 750 98 750 110 416
Reserves 811 - 811
Retained earnings (71 405) (54 357) (69 575)
Non-current liabilities 7 268 13 129 10 067
Other financial liabilities 7 268 13 129 9 732
Deferred taxation - - 335
Current liabilities 26 885 34 676 27 725
Trade and other payables 11 084 16 657 13 057
Other financial liabilities 10 504 12 325 9 098
Operating lease liabilities 142 199 185
Bank overdraft 5 155 5 495 5 385
Total liabilities 34 153 47 805 37 792
Total equity and liabilities 77 309 92 198 79 444
Number of shares in issue at period
end 1 384 039 225 634 039 225 636 836 895
Net asset value per share (cents) 3.12 6.99 6.54
Net tangible asset value per share
(cents) 1.83 2.53 3.73
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Total Revalua-
Share Share Share tion Accumulat Total
capital premium capital reserve ed Loss equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 28 February
2018 52 101 58 315 110 416 811 (69 575) 41 652
Rights issue 18 3 316 3 334 3 334
Total comprehensive loss for
the period - (1 830) (1 830)
Balance at 31 August 2018 52 119 61 631 113 750 811 (71 405) 43 156
CONDENSED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
28 February
31 August 2018 31 August 2017
2018
R'000 R'000 R'000
Cash flow from operating activities
Cash (utilised)/generated from operations (2 623) (103) (3 736)
Investment income - 1
Finance costs (970) (953) (2 253)
Cash flows utilised in operating activities (3 593) (1 056) (5 988)
Cash flows from investing activities
Purchase of property, plant and equipment (36) (716) (529)
Proceeds from disposal of property, plant
and equipment - 64
Purchase of intangible assets 2 467 -
Net movement in other financial assets 206 (901) 20
Cash flows generated/(utilised) in investing
activities 172 (1 150) (445)
Cash flows from financing activities
Proceeds from share issue 2 580 500 12 166
Net (repayment)/proceeds of other financial
liabilities (322) 1 073 (5 549)
Cash flows from financing activities 2 258 1 573 6 617
Net (decrease) / increase in cash and cash
equivalents (1 163) (633) 184
Cash and cash equivalents at beginning of
the period (3 962) (4 146) (4 146)
Cash and cash equivalents at end of the
period (5 125) (4 779) (3 962)
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 revenue from external customers originates in South Africa or from operations in South
Africa.
Notes to the financial information
1. Reconciliation of headline loss
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2018 August 2017 February 2018
R’000 R’000 R’000
Loss attributable to ordinary
shareholders (1 830) (11 851) (26 979)
Adjusted for:
Profit on disposal of non-current assets - (19)
Impairment of intangible asset - 6 644
Impairment of goodwill - - 3 249
Loss on sale of non-current assets
held for sale - - -
Tax effect on loss on sale of property,
plant and equipment - - (1 855)
Headline loss attributable to ordinary
shareholders (1 830) (11 851) (18 960)
Weighted and fully diluted average
shares in issue 1 384 039 225 634 039 225 636 837 895
Basic loss per share (cents) (0.13) (1.87) (4.24)
Diluted loss per share (cents) (0.13) (1.87) (2.98)
Headline loss per share (cents) (0.13) (1.87) (4.24)
Diluted headline loss per share (cents) (0.13) (1.87) (2.98)
OVERVIEW
The directors of Imbalie Beauty herewith present the Group financial results for the six months
ended 31 August 2018 (“the interim period”). Imbalie Beauty is a franchisor, distributor, 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, Perfect 10 and Dream Nails Beauty Salons.
The Imbalie Beauty Group’s unique differentiator is that it owns award-winning skin care brands,
namely Placecol and Skinderm, which are distributed to its salon footprint, large retailers and
independent salons and pharmacies.
It is evident from the results of the Group that both the Group and the business model of its
salon footprint were negatively affected by the continued difficult trading conditions, resulting in
the closure of 32 corporate salons and franchises during the interim period, negatively impacting
on the overall revenue and morale of the Group.
Overall trading of the Group improved subsequent to the interim period as a result the Group’s
strategic alliance with Edcon Limited and the introduction of Edcon Account Cards into its own
beauty salon footprint to accommodate customers by providing an alternative payment method
within the Group’s beauty salons and to attract new customers. The re-introduction of the
Placecol skin care brand during the interim period into Edgars after the innovation and
streamlining of the product range was completed, increasing overall customer awareness of the
Placecol brand. The Group also concluded a large training contract for the Edcon group of its
sales teams through Imbalie Beauty’s accredited training academy.
An additional positive achievement, subsequent to the interim period, was the opening of a
Perfect 10 beauty salon concept with a limited beauty offering within Mercedes-Benz car
dealerships to improve its service excellence to customers. This is a first in the world and
currently in pilot phase with Mercedes-Benz with the objective to rollout the concept to more car
dealerships in 2019.
The Group received the following awards for its beauty salons and own brand skin care ranges
subsequent to the interim period, as follows:
- Best of Pretoria Awards 2018
Placecol voted overall winner as best beauty salon
- Best of Bloemfontein Awards 2018
Placecol Victorian Square voted as best place to buy beauty products
Placecol Victorian Square voted as best beauty salon
Placecol Victorian Square voted as best nail salon
The factors listed above led to an increase in the overall moral of the Group.
FINANCIAL RESULTS
The Group’s revenue decreased by 30.5% to R22.4 million (2017: R32.2 million) due mainly to
the closure of corporate salons and a reduction in the opening of new salons. Gross profit
decreased by 18.3% to R14.9 million (2017: R18.2 million) and gross profit margins increased to
66.5% (2017: 56.6%) due to the Group’s focus on the distribution of its own product brands.
Operating costs decreased by 33.2% to R16.2 million (2017: R24.2 million) as a result of
significant cost savings implemented as part of the Group’s turnaround strategy. The majority of
these cost savings were effective towards the latter part of the interim period.
Loss and headline loss per share decreased to 0.13 cents (2017: loss of 1.87 cents).
Inventory decreased to R6.0 million as the Group focused on carrying its own core brands.
Imbalie Beauty Limited completed its rights issue to raise R15 million by issuing 750 million
shares at 2 cents per share in March 2018.
The Group had no material capital commitments for the purchase of property, plant and
equipment as at 31 August 2018.
STATEMENT OF GOING CONCERN
The financial results have been prepared on the going concern assumption on the basis that the
Company will conclude a successful reverse listing (as disclosed in the Subsequent Events
paragraph below) and the disposal of its cosmetic subsidiaries and businesses which will result
in further cost savings and improve the Company’s status as a going concern.
While management is aware of the cash-flow pressures and liquidity uncertainty after the interim
period, they continue to assess the situation and will be able to service its debts that become
due in the next 12 months and also fund operational losses that may arise. Management has
developed, and is in the process of addressing the liquidity and cash flow constraints, which
includes:
- Continuous assessment to reduce the overheads of the Company.
- As previously reported, the sub-lease of its premises was concluded during the interim
period to earn additional revenue.
- The launch of the Placecol skin care range into the Edgcon group was achieved during the
interim period.
The implementation of the above strategic interventions will improve and address the liquidity
and the cash flow position of the Group over the next 12 months.
SHARE CAPITAL
The rights issue was concluded during March 2018. Total rights shares offered by Imbalie
Beauty Limited was 750 000 000.
The reconciliation of shares issued are shown below:
31 August 2018 28 February 2018
Opening balance 1 205 715 182 629 872 558
General issue of shares - 4 166 667
Rights issue 178 324 043 571 675 957
1 384 039 225 1 205 715 182
DIVIDEND POLICY
The Group will not pay a dividend for the 2018 year.
CONTINGENCIES
The Group has various contingent liabilities in terms of head leases entered into with various
landlords on behalf of its franchise operators nationally. The Group has appointed an external
consultant to assist and monitor the Group’s exposure on an ongoing basis with an action plan
to actively reduce such exposure to the head leases. The Group entered into a business
continuation agreement with GetBucks to provide funding to certain of its franchise operators
which resulted in exposure of R5,2 million as at the reporting date.
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, 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 at revalued amounts.
Assets measured at fair
Carrying amounts Fair value
value
31 August 28 February 31 August 28 February
2018 2018 2018 2018
Land and buildings 13 021 489 13 142 322 14 137 500 14 258 333
Type Valuation technique
The fair value of land and buildings is determined by
applying the income approach valuation technique,
Land and buildings which incorporates the determination of discount
rate containing an appropriate risk premium.
The carrying amount of all significant financial instruments approximates the fair value.
FINANCIAL RISK MANAGEMENT
The Group's financial risk management objectives and policies are consistent with those
disclosed in the consolidated annual financial statements for the year ended 28 February 2018.
SUBSEQUENT EVENTS
The process of the reverse listing is taking longer than originally anticipated due to all the
regulatory requirement of the JSE Limited. An announcement will be made as soon as further
information becomes available.
The Group’s overall trading improved during October 2018 with the launch of the new
Mercedes- Benz concept and with improved revenue earned from selling the Group’s own skin
care ranges.
The property of the Group, revalued by an independent valuator subsequent to the interim
period, increased by R300k to R14.8 million.
BOARD CHANGES
Various changes have occurred to the board subsequent to year end, detailed below:
- Ms Debbie Wolfendale resigned as a non-executive director with effect from
1 March 2018.
- Mr Brent Kairuz was appointed as CEO with effect from 22 February 2018 and resigned
on 29 May 2018.
- Mr Jaques Rossouw resigned as financial director with effect from 7 May 2018.
- Ms Daleen Oosthuizen was appointed as financial director on 7 May 2018 and resigned
on 8 June 2018.
- Ms Rina de Jager has been appointed as financial director with effect from 16 July 2018.
PROSPECTS
The Board of Directors will continue to pursue the successful conclusion of a reverse listing and
the disposal of the Group’s cosmetic subsidiaries and businesses over the next couple of
months.
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 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 28 February 2018.
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, Rina de Jager. 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 has been correctly extracted from the unaudited Group
condensed interim financial results.
APPRECIATION
The directors would like to thank the team, customers, strategic partners and suppliers for their
continued support during the interim period.
By order of the Board
30 November 2018
Esna Colyn
Chief Executive Officer
CORPORATE INFORMATION
Non-executive directors: B J T Shongwe* (Chairman); W P van der Merwe; T J Schoeman*,
G D Harlow
*Independent
Executive directors: E Colyn, C W de Jager
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: 4Africa Exchange Registry
Designated Adviser: Exchange Sponsors (2008) (Pty) Limited
Date: 30/11/2018 04:16:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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