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PLC
PLC
PLC - Placecol Holdings - Reviewed Condensed Financial Results for the year
ended 29 February 2008
Placecol Holdings Limited
(formerly Zelpy 2170 (Pty) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
(JSE code: PLC ISIN: ZAE000102307)
("Placecol" or "the company" or "the group")
Highlights
- Largest franchisor in the health and beauty industry in South Africa
with 106 beauty outlets
- Revenue up 65% to R112.7 million
- Attributable earnings up 254% to R8.9 million
- Headline earnings up 211% to R7.8 million
- Adjusted headline earnings per share up 138% to 7.6 cents
Adjusted net tangible asset value per share up 75% to 31.7 cents
REVIEWED CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 29 FEBRUARY 2008
CONDENSED GROUP INCOME STATEMENTS
Reviewed Unaudited Audited
12 months Pro forma (1)
February (2) 3 months
2008 12 months February
R`000 February 2007
2007 R`000
R`000
Revenue 112 698 68 173 20 568
Gross profit 79 018 60 821 18 170
Other income 3 068 - -
Operating costs (66 480) (52 484) (15 182)
Earnings before interest, 15 606 8 337 2 988
taxation, depreciation and
amortisation ("EBITDA")
Depreciation (2 720) (2 898) (707)
Profit before interest and 12 886 5 439 2 281
taxation
Investment revenue 985 - 72
Fair value adjustments (202) (157) (157)
Finance costs (1 326) (1 537) (875)
Profit before taxation 12 343 3 745 1 321
Taxation (3 443) (1 229) (492)
Earnings attributable to 8 900 2 516 829
ordinary shareholders
Reconciliation of headline
earnings:
Earnings attributable to 8 900 2 516 829
ordinary shareholders
Adjusted for:
Profit on sale of property, 14 1 1
plant and equipment
Profit on sale of (1 074) - -
intellectual property (3)
Headline earnings 7 840 2 517 830
attributable to ordinary
shareholders
Weighted average shares in 118 349 94 355 556 94 355
issue on which earnings per 658 556
share are based (4)
Adjusted weighted average 103 361 79 366 988 79 366
shares in issue on which 090 988
earnings per share are based
(4)
Earnings per share (cents) 7.5 2.7 0.9
Headline earnings per share 6.6 2.7 0.9
(cents)
Adjusted earnings per share 8.6 3.2 1.0
(cents)
Adjusted headline earnings 7.6 3.2 1.0
per share (cents)
Notes:
Placecol was restructured with effect from 1 December 2006 in terms of the
Restructure Agreements ("Restructure Agreements") as set out in the
prospectus dated 10 August 2007 ("the prospectus").
In terms of the Restructure Agreements, Placecol acquired the entire issued
share capital of Placecol Cosmetics (Pty) Limited ("Placecol Cosmetics") and
the entire issued share capital of CW Pharmaceuticals (Pty) Limited ("CW
Pharmaceuticals"). CW Pharmaceuticals acquired the CW Pharmaceuticals
business conducted by Mooldew CC and Placecol Cosmetics acquired 30% of the
issued share capital of Placecol Skin Care (Pty) Limited. The historical
unaudited pro forma financial information for the year ended 28 February 2007
is based on the restructure of the company.
The profit on sale of intellectual property, which includes inter alia
product formulations of the Stylique brand as detailed under the heading
"prospects" was sold to Buhle Cosmetics (Pty) Limited and these profits are
excluded from headline earnings.
In terms of the prospectus, the February 2008 profit after tax for the
Placecol group of companies excluding Nomic 136 (Pty) Limited, trading as
Dream Nails and NSI Africa ("Dream Nails" or "DNB") was less than R9,2
million and the company will therefore repurchase 14 988 568 Placecol
ordinary shares from the original vendors on a pro rata basis for the
aggregate sum of R1.00 (refer "subsequent events" below).
The fully diluted earnings and headline earnings per share calculations is
not reflected, as the shares issued to the Share Incentive Scheme will be
cancelled, in terms of the rules of the Share Incentive Scheme, subsequent to
the 2008 year end.
CONDENSED GROUP BALANCE SHEET
Reviewed Audited
February February
2008 2007
R`000 R`000
ASSETS
Non-current assets 33 591 25 357
Property, plant and 8 041 14 339
equipment
Intangible assets 22 677 10 119
Finance lease receivables 69 -
Deferred taxation 2 201 899
Other financial assets 603 -
Current assets 60 766 26 505
Inventories 21 883 4 670
Loans to directors - 154
Other financial assets 6 933 2 025
Finance lease receivables 32 -
Trade and other receivables 20 923 12 219
Bank and cash 10 995 7 437
Total assets 94 357 51 862
EQUITY AND LIABILITIES
Equity 59 202 26 204
Share capital 49 473 25 375
Retained earnings 9 729 829
Non-current liabilities 11 683 5 554
Other financial liabilities 9 487 3 674
Finance and operating lease 2 183 1 800
liabilities
Deferred taxation 13 80
Current liabilities 23 472 20 104
Trade and other payables 7 880 10 099
Other financial liabilities 5 866 3 794
Taxation 5 728 1 494
Finance lease obligation 175 176
Operating lease liability - 155
Deferred income 2 101 3 052
Bank overdraft 1 722 1 334
Total equity and liabilities 94 357 51 862
Number of shares in issue at 132 504 976 104 000 000
year-end (1)
Adjusted number of shares in 115 116 408 89 011 432
issue at year-end (2)
Net asset value per share 44.7 25.2
(cents)
Net tangible asset value per 27.6 15.5
share (cents)
Adjusted net asset value per 51.4 29.4
share (cents)
Adjusted net tangible asset 31.7 18.1
value per share (cents)
Note:
The 2 400 000 ordinary shares issued to the Placecol Holdings Share Incentive
Scheme have been treated as "treasury" shares. These shares will be
cancelled, in terms of the rules of the Share Incentive Scheme, subsequent to
the 2008 year end.
The company will repurchase 14 988 568 Placecol ordinary shares from the
original vendors on a pro rata basis for the aggregate sum of R1.00 (refer
"subsequent events" below).
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Total Retaine Total
capital premium share d equity
R`000 R`000 capital income R`000
R`000 R`000
Balance 1 - - -
March 2006
Changes in
equity: Share
premium
Profit for the 829 829
year
Issue of 10 26 490 26 500 26 500
Shares
Issue costs (1 125) (1 125) (1 125)
written off
Balance 1 10 25 365 25 375 829 26 204
March 2007
Changes in
equity: Share
premium
Profit for the 8 900 8 900
year
Issue of 3 28 502 28 505 28 505
shares
Issue costs (2 007) (2 007) (2 007)
written off
Treasury (2 400) (2 400) (2 400)
shares held
Balance 29 13 49 460 49 473 9 729 59 202
February 2008
CONDENSED GROUP CASH FLOW STATEMENTS
Reviewed Audited
12 months 3 months
February February
2008 2007
R`000 R`000
Cash flows from operating (10 708) 633
activities
Cash flow from investing (9 244) (15 735)
activities
Cash flow from financing 23 122 21,205
activities
Net increase in cash and cash 3 170 6 103
equivalents
Cash and cash equivalents at 6 103 -
beginning of period
Cash and cash equivalents at end 9 273 6 103
of period
CONDENSED SEGMENT REPORT
Reviewed Unaudited
12 months Pro forma
February 12 months
2008 February
R`000 2007
R`000
Gross revenue
Brands 101 032 58 924
Supply chain and support 11 666 9 249
112 698 68 173
Profit before interest and
taxation
Brands 11 011 4 326
Supply chain and support 1 875 1 113
12 886 5 439
Depreciation
Brands 2 427 2 713
Supply chain and support 293 185
2 720 2 898
"Brands" include those companies directly involved in the market growing and
development of the group`s two main brands, Placecol and DNB. The supply and
support segment supports the `Brands` by research and development,
manufacturing of products, training and provision of qualified therapists and
providing specialised equipment.
OVERVIEW
The directors of Placecol are pleased to present the reviewed
annual financial results for the year ended 29 February 2008
("the 2008 year"). The company showed excellent growth despite
the fact that trading conditions were more challenging in the
second part of the year due to unscheduled load shedding by
Eskom in January, which affected the retail environment
negatively, and the rising interest rate environment.
The core business of Placecol is the manufacture and
distribution of Placecol branded skin care products, as well as
the provision of skin care and nail care treatments through
qualified therapists. The group`s products are distributed to
over 300 outlets which include 106 Placecol and DNB (previously
Dream Nails) company owned and franchised outlets at the end of
February 2008. For the 2008 year, the group continued its
drive to grow its geographical footprint and this has been
achieved through the roll out of beauty outlets in new
territorial areas, with the additional benefit on increased
product and equipment sales.
The Placecol salon base grew from to 32 salons to 53 reflecting
an increase of 66%. The acceptance and desirability of the
brand is also evident in the demand to own a Placecol Beauty
Centre. In 2007 there were only 3 franchisees, by 2008 there
were 19 franchisees and in the 1st quarter of the 2009
financial year, a further 8 salons have been franchised.
Through the DNB acquisition, the group acquired a further 44
stores which have since been expanded to 53, giving the group
106 beauty outlets nationwide and a commanding position as the
largest national salon chain and the largest franchisor in the
health and beauty industry in South Africa.
In respect of its franchise operations which the group started
to focus on aggressively during the 2008 year, the group earns
an initial upfront profit on the sale of a beauty outlet and
thereafter royalties and additional continuous benefits, such
as products, which are manufactured by the group, and equipment
sales.
During the 2008 year the group developed two new franchise
concepts: one suitable for medical practitioners and another
franchise concept specifically targeting black consumers, which
are detailed under the heading "prospects".
PLACECOL`S BRANDS
The recognition being gained by the Placecol brand is evident -
in 2004 there were only two Placecol Beauty Centres and at the
end of February 2008 there were 53. There are 19 franchised
stores included in the 53 salons (2007: 3 franchised stores).
The DNB brand, acquired in July 2007, has also, in the last six
months, accelerated growth with 7 new franchised outlets being
opened and a new flagship DNB salon opened in June 2008 in
Bedfordview, Johannesburg, which will portray the new "look and
feel" of the DNB brand.
Information relating to the two new brands developed during the
current financial year i.e., SkinPHD and Stylique is set out
under the heading "prospects".
FINANCIAL RESULTS
Company revenue increased by 65% to R112.7 million (2007: R68.2
million). The increase in revenue is mainly attributable to
increased franchised activities; increase in product sales and
an increase in revenue of CW Pharmaceuticals, the manufacturing
arm of Placecol. CW Pharmaceuticals has gained recognition as
a developer and formulator of new products and has attracted
new contract manufacturing customers to enhance overall
economies of scale.
Gross profit increased by 30% to R79.0 million (2007: R60.8
million) however as a result of a change in the group`s product
mix towards franchise activities, the overall gross profit
margin, while increasing in value, as a percentage has
decreased by 21% to 70.1% (2007: 89.2%). Operating costs
increased 27% to R66.5 million (2007: R52.5 million) which can
be attributed to the opening of new Placecol and DNB beauty
outlets as company-owned stores which are later sold to
appropriate franchisees. EBITDA increased 87%, to R15.6
million (2007: R8.3 million). EBITDA margins improved to 13.8%
(2007: 12.2%) for the 2008 financial year.
Profit attributable to ordinary shareholders increased by 254%
to R8.9 million (2007: R2.5 million). Adjusted earnings per
share increased by 169% to 8.6 cents (2007: 3.2 cents) and
adjusted headline earnings per share increased by 138% to 7.6
cents (2007: 3.2 cents).
Inventories increased to R22 million, of which R9.9 million
relates to company-owned stores available for sale as
franchises. Included in trade receivables is an amount of by
R3.8 million which relates to franchise debtors, where the
financing from external funders is in the process of being
finalised.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
Statement of compliance
The condensed financial statements comprise a consolidated
balance sheet at 29 February 2008, a consolidated income
statement, consolidated statement of changes in equity and
summarised consolidated cash flow statement for the year ended
29 February 2008. The condensed financial statements have been
prepared in accordance with International Financial Reporting
Standards ("IFRS"), IAS 34, the JSE Listings Requirements and
the South African Companies Act, 1973.
The accounting policies applied for the year are consistent
with those of the prior year with the exception of the adoption
of IFRS 7.
Basis of measurement
The condensed financial statements have been prepared on the
historical cost basis except for certain financial instruments
measured at fair value.
REVIEWED RESULTS
The auditors, RSM Betty & Dickson (Tshwane), have reviewed
these results and their unmodified review opinion is available
for inspection at the company`s registered office.
BUSINESS COMBINATIONS
Placecol acquired the entire issued share capital of, and all
shareholder claims on loan account against, Dream Nails from
the Dream Nails vendors with effect from 1 July 2007, in terms
of the Dream Nails Sale Agreement for a consideration of R12
209 952. Dream Nail`s revenue, included in the results
presented was R14 410 622, and a profit after tax of R1 110 747
was generated. The goodwill acquired on the acquisition was R9
508 354.
PROSPECTS
A further 26 new beauty outlets are scheduled to be opened
during the 2009 year between the Placecol and DNB brands, of
which 8 outlets have already been opened during the first
quarter of 2009.
The research and development of products and a franchise
concept to medical practitioners, namely SkinPHD, has been
completed and it is expected that the first SkinPHD outlet will
be opened in October 2008.
The Stylique franchise concept specifically targeting black
consumers will be launched by Buhle Cosmetics (Pty) Limited,
which has acquired the rights and intellectual property of the
products from the group. CW Pharmaceuticals will continue to
manufacture the products and the group will facilitate the
training and the roll-out of the Stylique franchise concept.
It is expected that the group will reach a total of 200
franchised outlets in South Africa during 2010.
SUBSEQUENT EVENTS
As detailed in paragraph 28.1 of the prospectus, the February
2008 profit after tax for the Placecol group of companies in
terms of the original group restructuring, excluding Nomic 136
(Pty) Limited, trading as Dream Nails and NSI Africa, was less
R9,2 million and the company will therefore repurchase 14 988
568 Placecol ordinary shares issued to Charles William Moolman,
Wessel Johannes de Wet, Richard Arthur Du Toit, Cannistraro 104
(Pty) Limited and Jan Heystek ("the vendors") on a pro rata
basis for the aggregate sum of R1.00.
DIVIDEND POLICY
It is the intention of the company to reconsider its dividend
policy once the group has achieved mature growth and
periodically thereafter to take account of prevailing
circumstances and future cash requirements. Initially all
earnings generated by the group will be utilised to fund future
growth and development.
SHARE CAPITAL
In terms of the prospectus, the trustees of the Share Incentive
Trust have the power to grant 2 400 000 shares at 100 cents per
share, to certain executives and key management. These shares
will be cancelled in terms of the rules of the Share Incentive
Trust.
STATEMENT ON GOING CONCERN
The condensed financial statements have been prepared on the
going-concern basis since the directors have every reason to
believe that the company has adequate resources in place to
continue in operation for the foreseeable future.
By order of the Board
6 June 2008
W J de Wet R A du Toit
Chief Executive Officer Chief Financial Officer
CORPORATE INFORMATION
Non executive directors: C E Chimombe-Munyoro, T
Dingaan
Executive directors: C W Moolman (Chairperson), W J De Wet (CEO);
R A du Toit (CFO); K N MacKinnon (Resigned 6 May 2008)
Registration number: 2003/025374/06
Registered address: Placecol Boulevard, Samrand Avenue,
Kosmosdal X4, Centurion 0157
Postal address: PO Box 8833, Centurion, 0046
Company secretary: L T Pretorius
Telephone: (012) 621 3300
Facsimile: (012) 621 3338
Transfer secretaries: Computershare Investor Services (Pty)
Limited
Designated Adviser: Vunani Corporate Finance
Date: 06/06/2008 08:04:03 Produced by the JSE SENS Department.
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