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 ) REVIEWED GROUP CONDENSED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2016 CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME 12 months Revenue 48 889 48 012 101 111 Cost of sales (21 868) (21 593) (41 906) Gross profit 27 021 26 419 59 205 Other income 1 229 1 097 2 799 Operating expenses (35 070) (26 746) (62 039) (Loss)/Earnings before interest, taxation, depreciation and amortisation (6 820) 770 (35) Depreciation and amortisation (725) (514) (1 144) (Loss)/Profit before interest and taxation (7 545) 256 (1 179) Investment revenue 19-1 Finance costs (937) (388) (343) Loss before taxation (8 463) (132) (1 521) Taxation 2 369 37 395 Loss for the period (6 094) (95) (1 126) Other comprehensive income Revaluation surplus - - (78) Total comprehensive loss for the year (6 094) (95) (1 204) Attributable to: Equity holders of the company (6 094) (95) (1 204) Loss per share attributable to equity holders of the company (Note 1): Basic loss per share (cents) (0.97) (0.03) (0.29) Headline loss per share (cents) (0.97) (0.03) (0.29) Diluted loss per share (cents) (0.97) (0.03) (0.29) Diluted headline loss per share (cents) (0.97) (0.03) (0.29)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION ASSETS Non-current assets 45 841 38 920 41 694 Property, plant and equipment 3 170 3 834 2 544 Goodwill 6 809 6 809 6 809 Intangible assets 22 367 17 958 20 555 Other financial assets 509-0 Deferred taxation 12 986 10 319 11 786 Current assets 52 118 41 848 56 161 Inventories 33 543 27 353 36 375 Other financial assets 631 386 884 Trade and other receivables 17 665 13 753 14 551 Cash and cash equivalents 279 356 4 351 Non-current assets held for sale 1 900 Total assets 97 959 80 768 99 755 EQUITY AND LIABILITIES Equity 64 947 41 604 71 414 Share capital 98 058 67 330 98 250 Reserves - 407 329 Retained earnings (33 111) (26 133) (27 165) Non-current liabilities 8 114 4 409 7 804 Other financial liabilities 8 114 4 409 6 718 Deferred taxation - - 1 086 Current liabilities 24 898 34 755 20 537 Trade and other payables 11 112 13 003 14 357 Other financial liabilities 8 107 17 468 4 882 Deposits and franchise fees received in advance - 1 192 719 Operating lease liabilities 604 397 578 Bank overdraft 5 075 2 695 1 Total equity and liabilities 97 959 80 768 99 755 Number of shares in issue at period end 629 872 558 345 547 773 629 872 558 Net asset value per share (cents) 15.55 23.37 11.34 Net tangible asset value per share (cents) 5.68 4.87 6.99
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY 12 months Balance at beginning of period 71 414 41 699 41 699 Loss for the period (6 094) (95) (1 126) Fair value adjustment (373) - (78) Total comprehensive loss for the period (6 467) (95) (1 204) General issue of shares - - 11 806 Rights issue - - 19113 Total issue of shares - - 30 919 Balance at end of period 64 947 41 604 71 414 CONDENSED GROUP STATEMENT OF CASH FLOWS 12 months Cash flows utilised from operating activities (12 520) (1 666) (12 943) Cash flows utilised in investing activities (1 298) (5 203) (5 733) Cash flows generated from financing activities 4 671 8 028 26 525 Net (decrease) / increase in cash and cash equivalents (9 147) 1 159 7 849 Cash and cash equivalents at beginning of period 4 351 (3 498) (3 498) Cash and cash equivalents at end of period (4 796) (2 339) 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 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 earnings 12 months Loss attributable to ordinary shareholders (6 094) (95) (1 126) Adjusted for: Loss on sale of property, plant and equipment - - 11 Tax effect on loss on sale of property, plant and equipment - - (3) Headline loss attributable to ordinary shareholders (6 094) (95) (1 118) Weighted average shares in issue 629 872 558 345 547 773 389 600 268 Weighted average diluted shares in issue 629 872 558 345 547 773 389 600 268 Basic loss per share (cents) (0.97) (0.03) (0.29) Diluted loss per share (cents) (0.97) (0.03) (0.29) Headline loss per share (cents) (0.97) (0.03) (0.29) Diluted headline loss per share (cents) (0.97) (0.03) (0.29) OVERVIEW The directors of Imbalie Beauty hereby present the reviewed interim results for the six months ended 31 ( interim period ). Imbalie Beauty is a franchisor, brand owner, service provider and more recently 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. Turnover increased slightly on the prior period despite the fact that the Group discontinued to supply its Placecol brand to a large retail group in. The continued growth was assisted by the acquisition of the brands in Prana Products (Pty) Limited on 1 June 2015 and the successful launch of the Skinderm skin care brand exclusively into its Perfect 10 franchise footprint. Market conditions continued to be challenging for the Group during the interim period with less consumers visiting the Group s beauty salons, however total ticket value continued to increase during the interim period. The following are projects that the Imbalie Beauty Group embarked on, with costs incurred during the interim period which will not be incurred during the latter part of the financial year: 1. Successfully relocated its head office to Woodmead at the end of with costs savings envisaged to be achieved over the medium to long-term. A bond to the amount of R8.5 million was approved to acquire the building and deposits to the amount of R4.7 million were paid by the Group towards the building. It is expected that the building will be transferred and registered in the name of the Group on 10 December 2016. The building was purchased for R13.2 million, revalued for R13.5 million (by an independent valuator) with a replacement value of R17.0 million. 2. Outsourced its distribution centre, the Group still had duplicated costs in distribution during the interim period of R650k, which will not re-occur in the second half of the year. 3. Acquisition of the Scinderm skin care brand (a medical doctor skin care brand) and the relaunch of the brand exclusively into the Perfect 10 salon group under Skinderm, a retail skin care brand. The working capital and marketing requirements to launch the brand amounted to more than R2.0 million. This step was required to finally position the Perfect 10 salon brand to offer an exclusive, high quality, accessible skin care brand to its end consumers. 4. Launch of the Imbalie Training Academy which recently received both ITEC and SETA accreditations. The Group will going forward now benefit significantly from these accreditations. Collaboration agreements have been implemented with Eduloan to facilitate funding for students. 5. During the interim period the Group regrouped its sales force to be more effective and efficient during tough trading conditions. Cost incurred by the Group in its sales force and marketing team during the interim period which will not occur in the second half of the year amounted to R1.5 million. 6. The group invested into the opening of the two new Placecol Aesthetic Clinics to elevate the Placecol brand. The Group embarked on a collaboration agreement with a doctors group to assist the Group with the final implementation of all business protocols. Normalised earnings for the Group were as follows: Notes above 6 Months ended 31 August 2016 Loss before taxation, interest and depreciation and amortisation (6 820) Impairment of the Group s corporate salons as a result of an 4 000
increase in losses incurred by these salons during the interim period Outsource of the Warehouse and Distribution Function Note 2 650 New Imbalie Training Academy Note 4 381 Improvement in the effectiveness of the Area Managers (sales team) and marketing team Note 5 1 556 Opening of two new Placecol Aesthetic Clinics Note 6 612 Normalised profit before taxation, interest and depreciation and amortisation 379 Imbalie Beauty is proud to announce that the Group received the following awards and nominations during the interim period and subsequent to the interim period as follows: 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. The support structures implemented over the last couple of years continues to be adequate to provide great support to the Group s salon footprint and technology will furthermore be used to take this support for franchisees to the next level, which is ultimately required for sustainability. The Group owned 26 corporate outlets at 31, which are included under inventories. Subsequent to the interim period four corporate salons were sold. Management will continue to focus on selling these outlets to potential owner-operator franchisees and currently have four potential transactions in the pipeline. FINANCIAL RESULTS Group revenue increased by 1.8% to R48.9 million (2015: R48.0 million) during the interim period due to the introduction of the Skinderm brand into the Perfect 10 franchise footprint and an increase in the re-sale of franchised salons in comparison to the prior period. Gross profit increased by 2.3% to R 27.0 million (2015: R26.4 million) and gross profit margins increased by 0.3% to 55.3% (2015: 55.0%), 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 consumers. Operating expenses increased by 31.5% to R35.1 million (2015: R26.7 million) as a result of: R4 million was impaired against the value of Group s corporate salons included under inventories, as a result of an increase in the losses made by these salons during the interim period; the costs associated with the opening of the two new Aesthetic Clinics; duplicated costs incurred with the initial outsourcing of the Distribution Centre; marketing and launch costs of the Skinderm brand; and the opening of the Imbalie Training Academy. It remains a primary focus point of management to sell these corporate owned salons to new franchisees in order to strengthen the cash flow of the Group. The cost effectiveness of overhead structures will be closely monitored for the remainder of the financial year. The increase in intangible assets in the Summary Statement of Financial Position to R22.4 million relate to development of the Skinderm skin care range and the successful development of 34 modular courses in the Imbalie Beauty Training academy. Trade and other receivable increased during the interim period mainly as a result of deposits to the amount of R4.7 million paid towards the purchase of the new head office in Woodmead. PROSPECTS Imbalie Beauty remains optimistic about the future, following the upgrade of its skin care product ranges and its salon brands, with specific mention to the Perfect 10 salon brand. The Group will continue to focus on the continued opening of more successful beauty salons, with four secured new salons in the pipeline for January 2017. Imbalie Beauty remains steadfast on it journey to transform and empower women working in our Group, upgrading its existing product offering and to innovate, offer better marketing, pricing and support structures to its franchisees. The Group has embarked on strategic developments to improve our service offerings to our salons through technology. 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 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 reviewed 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 reviewed group condensed interim financial results are consistent with those applied to the Group summary financial results for the year ended 28. These reviewed group condensed interim financial results incorporate the financial results of the Company and its subsidiaries. The preparation of the reviewed group condensed interim financial results was supervised by Imbalie Beauty s Financial Director, Wessel van der Merwe, CA (S.A.). The directors take full responsibility for the preparation of the reviewed group condensed interim financial results, and for ensuring that the financial and other information have been correctly extracted from the reviewed group condensed interim financial results. POST BALANCE SHEET EVENTS The Group entered into agreements to purchase 23 Saddle Drive, Woodmead Office Park for the amount of R13.2 million, the transfer of the property is expected to take place on 10 December 2016. 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 group condensed interim financial results for the period ended 31. 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, staff for their extended efforts and our clients, strategic partners and suppliers for their support during the period. By order of the Board 30 November 2016 Esna Colyn Chief Executive Officer Wessel van der Merwe 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 Wolfendale 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