Wrap Text
Reviewed Provisional Condensed Consolidated Financial Statements for the Year Ended 28 February 2019
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 2019
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
28 February 2019 28 February 2018
R'000 R'000
Revenue 41 809 61 291
Cost of sales (16 098) (26 272)
Gross profit 25 711 35 019
Other income 2 822 1 963
Operating expenses (29 921) (46 531)
Impairment of corporate salons - (8 630)
Impairment of intangible assets - (6 644)
Impairment of goodwill - (3 249)
Impairment of other financial assets - (1 431)
Operating loss before interest, taxation,
depreciation and amortisation (1 388) (29 503)
Depreciation and amortisation (1 283) (1 829)
Loss before interest and taxation (2 671) (31 332)
Investment income 117 1
Finance costs (2 397) (2 253)
Loss before taxation (4 951) (33 584)
Taxation 1 655 6 605
Loss attributable to ordinary shareholders (3 296) (26 979)
Revaluation surplus net of taxation 223 725
Total comprehensive loss for the year (3 073) (26 254)
Attributable to:
Equity holders of the company (3 073) (26 254)
Weighted and fully diluted average shares in
issue (‘000) 1 377 428 636 836
Loss per share attributable to equity holders of
the Group (Note 1):
Loss per share (cents) (0.24) (4.24)
Headline loss per share (cents) (0.24) (2.98)
Fully diluted loss per share (cents) (0.24) (4.24)
Fully diluted headline loss per share (cents) (0.24) (2.98)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
28 February
28 February 2019 2018
R'000 R'000
ASSETS
Non-Current Assets 58 069 57 228
Property, plant and equipment 16 143 16 720
Goodwill 3 560 3 560
Intangible assets 13 905 14 312
Other financial assets 476 342
Deferred tax 23 985 22 293
Current Assets 14 135 22 216
Inventory 5 901 8 014
Other financial assets 714 843
Trade and other receivables 7 389 11 936
Cash and cash equivalents 131 1 423
Total Assets 72 204 79 444
EQUITY AND LIABLITIES
EQUITY 41 895 41 652
Share Capital 113 732 110 416
Reserves 1 034 812
Accumulated loss (72 871) (69 575)
LIABLITIES
Non-Current Liabilities 8 286 10 067
Other financial liabilities 7 807 9 732
Deferred tax 479 335
Current liabilities 22 023 27 725
Trade and other payables 10 263 13 057
Other financial liabilities 7 583 9 098
Operating lease liabilities 240 185
Bank overdraft 3 937 5 385
TOTAL LIABILITIES 30 309 37 792
TOTAL EQUITY AND LIABLITIES 72 204 79 444
Number of ordinary shares in issue at year end 1 384 039 225 636 836 895
Net asset value per share (cents) 3.03 6.54
Net tangible asset value per share (cents) 1.77 3.73
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total
Share Share Share Revaluation Accumulated Total
capital premium capital reserve Loss equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 28 February
2018 52 101 58 315 110 416 812 (69 575) 41 652
Rights issue - 3 316 3 316 - - 3 316
Total comprehensive loss for
the year - - - 223 (3 296) (3 073)
Balance at 28 February
2019 52 101 61 631 113 732 1 034 (72 871) 41 895
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
28 February 2019 28 February 2018
R'000 R'000
Cash flow from operating activities
Cash generated from operations 2 533 (3 736)
Investment income 117 1
Finance costs (2 397) (2 253)
Cash flows from/(utilised) in operating activities 253 (5 988)
Cash flows from investing activities
Purchase of property, plant and equipment (18) (529)
Proceeds from disposal of property, plant and equipment 59 64
Purchase of intangible assets (9) -
Net movement in other financial assets (5) 20
Cash flows utilised in investing activities 27 (445)
Cash flows from financing activities
Proceeds from share issue 3 316 12 166
Net (repayment)/proceeds of other financial liabilities (3 440) (5 549)
Cash flows from financing activities (124) 6 617
Net increase in cash and cash equivalents 156 184
Cash and cash equivalents at beginning of the year (3 962) (4 146)
Cash and cash equivalents at end of the year (3 806) (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 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
28 February 2019 28 February 2018
R'000 R'000
Reconciliation of headline loss:
Loss attributable to ordinary shareholders (3 296) (26 979)
Adjusted for:
Profit on disposal of non-current assets (1) (19)
Impairment of intangible asset - 6 644
Impairment of goodwill - 3 249
Tax effect - (1 855)
Headline loss attributable to ordinary
shareholders (3 297) (18 960)
Weighted and fully diluted average shares in
issue (‘000) 1 377 428 636 837
Loss per share (cents) (0.24) (4.24)
Headline loss per share (cents) (0.24) (2.98)
Fully diluted loss per share (cents) (0.24) (4.24)
Fully diluted headline loss per share (cents) (0.24) (2.98)
OVERVIEW
The directors of Imbalie Beauty herewith present the Group’s annual financial results for the
year ended 28 February 2019 (“the 2019 year” or “2019”). Imbalie Beauty is a leading
beauty and wellness group, its focus primarily on the development and transformation of
people working in our franchise salon footprint (“salon footprint”) through ongoing education
and the development, growth and innovation of our own skin care product brands, being
Placecol and Skinderm. The Placecol skin care brand turns forty in January 2020.
Imbalie Beauty has its own and franchise salon footprint through the following franchise
salon chains: Placecol Skin Care Clinics, Perfect 10 and Dream Nails Beauty Salons. The
Group’s skin care brands are available to consumers in its own salon footprint, large retail
groups, pharmacies, various independent salon outlets and on various on-line platforms.
The Group’s salon footprint experienced continued difficult trading conditions, which resulted
in the closure of unprofitable franchises and corporate salons during the year and
subsequent to the year end. This had a negative impact on the overall revenue of the
Group. The Group strengthened its strategic relationship with Edgars during the year and
introduced its reformulated and upgraded award-winning Placecol skin care products into the
large retailer, opening 43 new retail doors during the year. Prior to opening these retail
doors, the Group successfully introduced Edcon’s credit facilities into its beauty salon
footprint to ensure that its salon footprint works in synergy with Edgars. This initiative
differentiated the Group’s salons from competitors and has had a positive impact on average
ticket size achieved in the Group’s beauty salons. Edcon has 3 million account card holders
and this is expected to lead to growth in our salon customer base.
The Group is in the process of expanding its offering to consumers which will include certain
wellness concepts to attract new customers into our salon footprint. The Group is in the
process to secure a buyer for its property to improve the overall cash flow position of the
Group and to settle expensive debt with the excess cash realised from the disposal of the
property.
The Group completed its rights issue during February and March 2018 to the amount of
R15 million. The purpose of the rights issue was to fund the internal restructuring of the
Group, strengthening of the balance sheet and to provide ongoing working capital
requirements for the Group.
The Group continued to receive various industry awards for its beauty salons. Placecol skin
care clinics was recognised by the Best of Pretoria Awards in 2018 for the sixth consecutive
year, and for the fourth year in a row by Best of Bloemfontein, reinforcing our beauty salons
as the consumer’s preferred choice in these regions.
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 except for the adoption of the new
standards effective as disclosed in the First Time adoption note below.
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 2019 was supervised by Imbalie Beauty’s Chief Executive Officer, Esna
Colyn CA(SA). The directors take full responsibility for the preparation of these provisional
condensed consolidated financial statements for the year ended 28 February 2019.
These condensed consolidated financial statements for the year ended 28 February 2019
have been reviewed by Nexia SAB&T, who expressed an unmodified review conclusion. The
auditor’s report contained the following going concern 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 through the
disposal of the building currently owned, 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.
A copy of the auditor’s review report is available for inspection at the Company’s registered
office together with the financial statements identified in the auditor’s report.
FIRST TIME ADOPTION OF NEW ACCOUNTING STANDARD
IFRS 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS
IFRS 15 relates to the measurement, classification and disclosure of revenue from contracts
with customers and establishes a five-step model to account for revenue arising from
contracts with customers which requires:
- The identification of the contract with customers;
- Identify the performance obligation in the contract;
- Determining the transaction price;
- Allocating the transaction price to the performance obligation; and
- Recognising the revenue as the performance obligation has been met.
Under IFRS 15, revenue is recognised as the Group satisfies performance obligations and
transfers control of goods or services to its customers as opposed to the application of the
risks and rewards criteria under IAS 18. The measurement of revenue is determined based
on the amount to which the Group expects to be entitled, allocated to each specific
performance obligation. Depending on whether certain criteria are met, revenue is
recognised either over time or at a point in time, as or when control of goods or services is
transferred to the customer.
The Group has adopted the modified retrospective approach in applying IFRS 15 whereby
no comparative figures are restated but instead, a cumulative catch-up adjustment is
recognised, if necessary, in opening retained earnings. The implementation of IFRS 15 had
no impact on the Group's previously reported earnings and headline earnings.
IFRS 9 – FINANCIAL INSTRUMENTS
The Company adopted for first time implementation, IFRS 9 – Financial Instruments. IFRS 9
was issued by the IASB in July 2014 and is effective for accounting periods beginning on or
after 1 January 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and
Measurement and introduces new requirements for:
1. the classification, measurement and derecognition of financial assets and financial
liabilities;
2. the impairment of financial assets; and
3. general hedge accounting.
The Group has adopted the modified retrospective approach in applying IFRS 9 whereby no
comparative figures are restated but instead, a cumulative catch-up adjustment is
recognised, if necessary, in opening retained earnings.
Classification, measurement and derecognition:
The Group has assessed the impact of the business model on the classification of financial
instruments in terms of IFRS 9. Based on this assessment, there has been no change in the
classification of the Group’s financial assets and financial liabilities. The Group’s financial
assets and liabilities remain classified as carried at amortised cost.
Impairment model:
IFRS 9 introduces an expected credit loss model as opposed to an incurred credit loss
approach in recognising any impairment of financial assets. The expected credit loss model
requires the Group to account for expected credit losses and changes in those expected
credit losses at each reporting date, to reflect changes in credit risk since initial recognition
of the financial assets. In other words, it is no longer necessary for a credit event to have
occurred before credit losses are recognised. The Group applies the IFRS 9 expected loss
model by formulating the expected future losses of customers based on past behaviour,
current exposure and future economic scenarios.
The above change in accounting policy has not resulted in a material difference for the year
ended 28 February 2019 by performing the 2018 allowance calculation based on the IFRS 9
requirements and consequently the opening retained earnings has not been adjusted.
FINANCIAL RESULTS
The Group’s revenue decreased by 31.8% to R41.8 million (2018: R61.3 million) mainly due
to the closure of corporate and franchised salons and a reduction in new salon openings.
Gross profit has decreased by 26.6% to R25.7 million (2018: R35.0 million) and gross profit
margins increased to 61.5% (2018: 57.1%), due to the Group focusing on the distribution of
its own product brands. Included in cost of sales are the Group’s distribution costs and once
off inventory write offs relating to corporate salons closed and redundant products to the
amount of R1.8 million.
Operating costs decreased by 55.1% to R29.8 million (2018: R66.5 million) as a result of
significant cost savings implemented as part of the Group’s turnaround strategy. Operating
costs include once off costs with regards to landlord settlements to the amount of R1,5
million.
Loss per share decreased to a loss of 0.24 cents (2018: loss of 4.24 cents) and the headline
loss per share was 0.24 cents (2018: loss 2.98 cents).
The Group’s property was valued by an independent valuator during the year and the value
increased with R223 000 (net of taxation).
Inventory decreased by R2.0 million as a result of the Group focusing on the distribution of
its own product brands and the distribution of less external brands.
The Group had no material capital commitments for the purchase of property, plant and
equipment as at 28 February 2019.
STATEMENT OF GOING CONCERN
The financial statements have been prepared based on accounting policies applicable to a
going concern. This basis presumes that funds will be available to finance future operations
and that the realisation of assets and settlement of liabilities, contingent obligations and
commitments will occur in the ordinary course of business.
As the current liabilities exceed the current assets by R7.8 million, a material uncertainty
exists regarding the liquidity position of the Group. In order to address this position, the
Company has entered into plans to dispose of its property during the next financial year. The
disposal will release sufficient working capital to ensure the Company remains liquid and
sufficient cash flows exists to cover payables on an operational level. Refer to the Prospects
Paragraph.
SHARE CAPITAL
Total rights offered by Imbalie Beauty Limited in February 2018 was 750 000 000, the total
number of rights issue shares issued at February 2018 was 571 675 957, with the remainder
of the shares issued during the 2019 financial year.
The reconciliation of shares issued is shown below:
Reviewed Audited
28 February 2019 28 February 2019
R R
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 2019 year.
CONTINGENCIES AND COMMITMENTS
The Group has various contingent liabilities in terms of head leases entered into with various
landlords on behalf of its franchise operators nationally. The exposure of the Group is
monitored on an ongoing basis with an action plan to actively reduce the Group’s exposure
to head leases. The Group’s exposure to head leases reduced from 56 head leases to 28
head leases with a further 9 in the process of being transferred, reducing the exposure to
less than 20 head leases.
The Group entered into a business continuation agreement with GetBucks to provide funding
to certain of its franchise operators. The Group’s exposure as at 28 February 2019 in this
regard amounts to R5.6 million.
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 at revalued amounts.
Assets measured at Carrying amounts Fair value
fair value
28 February 28 February 28 February 28 February
2018 2019 2018 2019
Land and buildings 13 267 700 13 151 550 14 258 333 14 311 667
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.
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 2018.
SUBSEQUENT EVENTS
Subsequent to year end, the Company has entered into plans to dispose of its property
which is currently fairly valued at R14.8 million.
BOARD CHANGES
Various changes have occurred to the board during the year ended 28 February 2019.
Further details of these changes are included under the section Board changes below.
- Mrs Debbie Wolfendale resigned on 1 March 2018.
- Mr Brent Kairuz was appointed on 22 February 2018 and resigned on 29 May 2018.
- Mr Jaques Rossouw resigned on 7 May 2018.
- Ms Daleen Oosthuizen was appointed on 7 May 2018 and resigned on 8 June 2018.
- Ms Rina de Jager was appointed on 8 June 2018.
No board changes have occurred to the board subsequent to year end.
PROSPECTS
The Board of Directors will actively pursue the successful conclusion of the disposal of its
property to realise excess capital to settle expensive debt. The Company intends to apply
for the lifting of its suspension after the issue of the Annual Financial Statements.
Furthermore, as part of the Group’s commitment and vision to be the leading and most
desirable beauty and wellness group, the Group has entered new sustainable distribution
channels to increase product sales and overall awareness for the group’s brands with
customers. The Group will continue to keep its overheads low to ensure profitability and
sustainability.
The Group has concluded training to its entire salon footprint during April and May 2019 to
improve overall service delivery excellence levels to customers. The Group has during May
2019 launched a “wellness concept” into its salon footprint in order to attract new customers
into its salon footprint. The upgrade of the Group’s Rewards Programme Communication
bodes well to improve overall communication to existing customers.
A new digital awareness campaign will be launched in June 2019 to attract new customers
into our beautiful salon brands. As part of our ongoing commitment to innovation the group
will in June 2019 launch four products in the Placecol skin care range which are earmarked
as our superior solution to address primary skin care concerns on a biological level.
Shareholders are advised that discussions to acquire Wepex Geotechnical (Pty) Limited (“Wepex”)
and Makgarapa Products (Pty) Limited (“Makgarapa”) have been terminated on 29 May 2019.
Statements contained in this announcement, regarding the prospects of the Group, have not
been reviewed or audited by the Group’s external auditors.
APPRECIATION
The directors would like to thank our non-executive directors for their valuable input during a
challenging year, our team, franchise partners, customers, strategic partners and suppliers
for their business during the year.
By order of the Board
31 May 2019
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, CW de Jager
Registration number: 2003/025374/06
Registered address: Imbalie Beauty Boulevard, 23 Saddle Drive, Sandton, 2191
Postal address: PO Box 8833, Centurion, 0046
Company secretary: P Atkins
Telephone: (011) 086 9800
Transfer secretaries: 4Africa Exchange Registry (Pty) Limited
Designated Adviser: Exchange Sponsors (2008) (Pty) Limited
Date: 31/05/2019 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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