| Fri 28 Nov 2008, 11:59 | | PLC - Placecol Holdings - Unaudited condensed interim financial results for the |
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PLC
PLC
PLC - Placecol Holdings - Unaudited condensed interim financial results for the
six months ended 31 August 2008
PLACECOL HOLDINGS 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")
UNAUDITED CONDENSED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
2008
Condensed Group Income Statements
Unaudite Reviewed Restated Audited
d 6 months (1) 12 months
6 months August Unaudited February
August 2007 12 months 2008
2008 R`000 February R`000
R`000 2008
R`000
Revenue 60 839 63 287 115 286 115 286
Cost of sales (24 406) (22 579) (36 013) (33 988)
Gross profit 36 433 40 708 79 273 81 298
Other income (2) 6 137 - 1 256 1 256
Operating expenses (40 151) (32 953) (70 106) (69 790)
Profit before interest 2 419 7 755 10 423 12 764
and taxation
Net finance costs (495) (453) (1 253) (458)
Profit before taxation 1 924 7 302 9 170 12 306
Taxation (577) (2 147) (2 774) (3 684)
Profit attributable to 1 347 5 155 8 622
ordinary shareholders 6 396
Reconciliation of
headline earnings:
Profit attributable to 1 347 5 155 6 396 8 622
ordinary shareholders
Adjusted for loss on - - 97 97
disposal of property,
plant and equipment
Profit on sale of - - (1 074) (1 074)
intellectual property
Headline earnings 1 347 5 155 5 419 7 645
attributable to
ordinary shareholders
Weighted average shares 132 504 106 023 118 349 118 349
in issue on which 976 311 658 658
earnings are based
Adjusted weighted 94 658 - 82 902 106 089
average shares in issue 180 862 064
on which earnings are
based (3)
Earnings per share 1.0 4.9 5.4 7.3
(cents)
Headline earnings per 1.0 4.9 4.6 6.5
share (cents)
Adjusted earnings per 1.4 - 7.7 8.1
share (cents) (3)
Adjusted headline 1.4 - 6.5 7.2
earnings per share
(cents) (3)
Notes:
Shareholders are referred to the announcement, dated 21 November 2008, which
advised that further adjustments, which could result in a decrease in profit
after tax of R2,226 million, may be necessary in respect of the audited results
for the year ended 29 February 2008, mainly as a result of an increase in
liabilities and a decrease in inventory. The Board has initiated an urgent and
thorough audit into this matter.
Other income includes the sale of the Australian Master Franchise in August
2008.
The repurchase and cancellation of 11 893 332 ordinary shares from vendors and 2
400 000 ordinary shares issued to the Placecol Share Incentive Scheme, which
repurchases and cancellations were approved by shareholders at the annual
general meeting held on 2 October 2008, have been included in the calculation of
the adjusted earnings and headline earnings per share. These 14 293 332
ordinary shares will be cancelled once the company is out of its closed period.
The possible repurchase and cancellation of a further 23 553 464 ordinary shares
from the vendors has also been included in the calculation of adjusted earnings
and headline earnings reported under the restated unaudited February 2008 and
unaudited August 2008 results (refer note 1 above).
Condensed Group Balance Sheets
Unaudite Reviewed Restated Audited
d August (1) February
August 2007 Unaudited 2008
2008 R`000 February R`000
R`000 2008
R`000
ASSETS
Non-current assets 37 738 37 594 34 472 34 472
Property, plant and 9 043 12 130 8 018 8 018
equipment
Goodwill and intangible 21 029 22 421 21 010 21 010
assets
Deferred tax 1 481 1 182 2 141 2 141
Loans receivable 6 185 1 861 3 303 3 303
Current assets 55 234 53 328 52 584 54 610
Inventories (1) 21 120 11 468 21 402 23 198
Other financial assets 2 081 - 2 538 2 539
Trade and other 27 813 23 604 17 712 17 941
receivables (1)
Cash and cash 4 220 18 256 10 932 10 932
equivalents
Total assets 92 972 90 922 87 056 89 082
EQUITY AND LIABILITIES
Equity 56 022 55 844 54 675 56 902
Share capital 47 451 49 858 47 451 47 451
Retained earnings 8 571 5 986 7 224 9 451
Non-current liabilities 13 147 6 687 11 399 10 604
Financial liabilities 13 137 6 609 11 386 10 591
(1)
Deferred taxation 10 78 13 13
Current liabilities 23 803 28 391 20 982 21 576
Trade and other 13 868 15 861 10 598 10 283
payables (1)
Other financial 4 152 4 940 4 178 4 178
liabilities
Taxation 3 162 4 361 4 105 5 014
Income received in 689 1 179 2 101 2 101
advance
Bank overdraft 1 932 2 050 - -
Total equity and 92 972 90 922 87 056 89 082
liabilities
Number of shares in 132 504 132 504 132 504 132 504
issue at period end 976 976 976 976
Adjusted number of 94 658 - 94 658 118 211
shares in issue at 180 180 644
period end (2)
Net asset value per 42.3 42.2 41.3 42.9
share (cents)
Net tangible asset 26.4 25.2 25.4 27.1
value per share (cents)
Adjusted net asset 59.2 - 57.8 48.1
value per share (cents)
(2)
Adjusted net tangible 37.0 - 35.6 30.4
asset value per share
(cents) (2)
Notes:
As noted under the income statement, an adjustment of R2,226 million may be
necessary, mainly as a result of an increase in liabilities and a decrease in
inventory.
The repurchase and cancellation of 11 893 332 ordinary shares from the vendors
and 2 400 000 ordinary shares issued to the Placecol Share Incentive Scheme,
which repurchases and cancellations were approved by shareholders at the annual
general meeting held on 2 October 2008, have been included in the calculation of
the adjusted net asset value and adjusted net tangible asset value per share.
These 14 293 332 ordinary shares will be cancelled once the company is out of
its closed period. The possible repurchase and cancellation of a further
23 553 464 ordinary shares from vendors has also been included in the
calculation of adjusted net asset value and adjusted net tangible asset value
per share reported under the restated unaudited February 2008 and unaudited
August 2008 results (refer note 1 under the Income Statement).
Condensed Group Statements of Changes in Equity
Unaudited Reviewed Restated Audited
6 months 6 months Unaudited 12 months
August 2008 August 12 months February
R`000 2007 February 2008
R`000 2008 R`000
R`000
Balance at beginning 54 675 26 204 24 182 24 182
of period
Issue of share - 24 485 24 098 24 098
capital
Net profit for the 1 347 5 155 6 395 8 622
period
Balance at end of 56 022 55 844 54 675 56 902
period
Condensed Group Cash Flow Statements
Unaudited Reviewed Restated Audited
6 months 6 months Unaudited 12 months
August August 12 months February 2008
2008 2007 February R`000
R`000 R`000 2008
R`000
Cash flows from (5 616) (3 490) (12 588) (16 051)
operating activities
Cash flows from (4 753) (10 260) (12 645) 326
investing activities
Cash flows from 1 725 23 853 30 062 20 554
financing activities
Net increase in cash (8 644) 10 103 4 829 4 829
and cash equivalents
Cash and cash 10 932 6 103 6 103 6 103
equivalents at
beginning of period
Cash and cash 2 288 16 206 10 932 10 932
equivalents at end of
period
Segmental Reporting
Unaudited Reviewed Restated Audited
6 months 6 months Unaudited 12 months
August August 12 months February
2008 2007 February 2008
R`000 R`000 2008 R`000
R`000
Revenue
Brands 29 762 27 629 84 869 84 869
Supply chain support 31 077 35 658 30 417 30 417
60 839 63 287 115 286 115 286
Profit before interest
and Taxation
Brands 4 657 2 299 5 765 6 880
Supply chain support (2 238) 5 456 4 658 5 884
2 419 7 755 10 423 12 764
Depreciation
Brands Brands 975 895 1 874 1 874
Supply chain support 310 891 567 567
1 285 1 786 2 441 2 441
OVERVIEW
The directors of Placecol present the unaudited interim results
for the six months ended 31 August 2008 ("interim period"). The
results were well below expectations, due to the following:
Increase in overhead marketing expenditure:
A decision was made to increase marketing expenditure during the
interim period in an attempt to increase sales and gain market
share. However, as a result of the slow-down in the economy,
the group`s revenue and profits did not benefit from the
increased marketing expenditure. Marketing expenses for the
period amounted to R2.8 million.
More stringent requirements for credit in terms of the National
Credit Act:
Potential franchisees are currently experiencing difficulty in
obtaining finance, which has resulted in a slow-down of store
sales which has had a negative impact on the group`s gross
profit as well as an increase in trade receivables. The
Placecol and DNB franchised business models have been approved
by all of the major financial institutions, which should
streamline the future financing process. The Industrial
Development Corporation of South Africa Limited has reserved a
three year, R11.5 million facility for the financing of Placecol
and DNB franchise stores.
Company owned stores:
A strategic decision was taken to open and operate company owned
stores before securing a franchisee, in order to grow the
Placecol and DNB footprint. The establishment costs to operate
and turn the company owned stores into profitable businesses are
in excess of R3.5 million before taxation. The focus for the
remaining two quarters of 2009 will be to sell all existing
company owned stores. In future, stores will only be opened
once a suitable franchisee has been secured. Nine new Placecol
stores and six new DNB stores were opened during the interim
period, six DNB stores were defranchised during the interim
period resulting in a net increase of nine stores from 100
stores to 109 stores at the end of August 2008.
On the positive side the group opened new Placecol and DNB
stores in A grade location shopping centres, which will assist
in the visibility and growth of the brands.
FINANCIAL RESULTS
Group revenue decreased by 4% to R60.8 million (2007: R63.3 million), mainly as
a result of fewer brands being launched, the present economic conditions as well
as fewer sales promotions being held during the current period. Gross profit
decreased to R36.4 million (2007: R40.7 million) and gross profit margins
decreased 4% to 60% (2007: 64%) as a result of franchise outlets being sold
through the franchise division, which are higher in value but attract lower
gross profit margins.
Operating expenses increased 22% to R40.2 million (2007: R33.0 million), mainly
as a result of the:
- start-up costs of company owned stores not yet sold to franchisees;
- increase in marketing spend of R1 million; and
- incorporation of operating expenses of R3.8 million relating to DNB, which
operating expenses were only included for one month in the comparative interim
period as DNB was acquired in August 2007.
The group has commenced the restructuring of DNB, which made losses of R1.1
million during the interim period.
Other income of R6.1 million includes the sale of the Australian Master
Franchise during August 2008 (R4.2 million), which will assist with the
positioning of the group in international markets.
Profit before interest and taxation decreased 69% to R2.4 million (2007:
R7.8 million) mainly as a result of a decrease in gross profit margins and the
increase in overhead expenditure described above. Headline earnings decreased
75% to R1.3 million (2007: R5.2 million) for the comparative period.
The increase in inventory to R21.1 million during the interim period (2007:
R11.5 million) was as a result of a higher number of company owned stores
available for resale included in inventory at 31 August 2008.
The group has no material capital commitments for the purchase of property,
plant and equipment as at 31 August 2008.
PROSPECTS
A complete restructure process of the DNB head office commenced during the
interim period and will be completed during the last quarter of this financial
year. It is estimated that the DNB restructuring will result in a reduction in
overhead expenditure of approximately R2 million per annum, the full benefit of
which will only be visible in the 2010 financial year.
Four franchised DNB and Placecol stores will open in Nairobi and Lagos within
the next six months and should assist the group with its African growth
strategy.
Placecol received and shipped its first order of products into the United States
of America where the Placecol products will be distributed to beauty spas by a
licensed distributor. Due to the weaker Rand, Placecol is in a favourable
export position, hence the continued investigation into various export
initiatives.
The group`s brands, with their strong value propositions, make them affordable
to consumers in the current economic climate and should assist the group to gain
market share against competitors which import products.
The necessary cost controls have been implemented by the group to manage costs
and efficiencies during the second half of the financial year.
BASIS OF PREPARATION
The interim results have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), the Companies Act (Act 61 of 1973), as
amended, and International Accounting Standards (IAS 34 : Interim Financial
Reporting). The accounting policies used to prepare these interim financial
statements are consistent with those applied in the prior interim period and at
previous year-end, except where the group has adopted new or revised IFRS
standards.
These consolidated interim financial statements incorporate the financial
statements of the company, its subsidiaries and special purpose entities that,
in substance, are controlled by the group. Results of subsidiaries are included
from the effective date of acquisition or up to the effective date of disposal.
All significant transactions and balances between group enterprises are
eliminated on consolidation.
POST BALANCE SHEET EVENTS AND SHARE CAPITAL
The company`s Prospectus incorporated details of the restructuring of the
company and the requirement to repurchase shares from the original vendors
should the consolidated net profit after tax for the year ended 29 February 2008
be less than R9.2 million. Shareholders are referred to the announcement, dated
5 September 2008, which contained details of the repurchase and cancellation of
11 893 332 shares from such vendors, which repurchase and cancellation was
approved by shareholders at the annual general meeting held on 2 October 2008.
The repurchase and cancellation of 2 400 000 ordinary shares issued to the
Placecol Share Incentive Scheme was also approved at the annual general meeting.
These repurchases and cancellations will be effected once the company is out of
its closed period.
Shareholders are referred to the announcement dated 21 November 2008, which
advised that further adjustments, which could result in a decrease in profit
after tax of R2.226 million, may be necessary in respect of the audited results
for the year ended 29 February 2008, mainly as a result of an increase in
liabilities and a decrease in inventory. The Board has initiated an urgent and
thorough audit into this matter. Having regard to the aforementioned, it may be
necessary to repurchase and cancel a further 23 553 464 ordinary shares from the
original vendors for an aggregate amount of R1.00.
STATEMENT ON GOING CONCERN
The 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.
DIVIDEND POLICY
No dividend has been declared for the interim period.
By order of the Board
28 November 2008
W J de Wet S Morgan
Chief Executive Officer Chief Financial Officer
CORPORATE INFORMATION
Non executive and independent directors: C Nkosi; S du Toit
Executive directors: C W Moolman (Chairperson), W J De Wet (CEO); S Morgan (CFO)
Registration number: 2003/025374/06
Registered address: Placecol Boulevard, Samrand Avenue, Kosmosdal X4, Centurion
0157
Postal address: PO Box 8833, Centurion, 0046
Company secretary: Ithemba Governance and Statutory Solutions (Pty) Limited
Telephone: ( (083) 264 0328
Facsimile: (086) 604 1315
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Vunani Corporate Finance
Date: 28/11/2008 11:59:32 Produced by the JSE SENS Department.
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