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PLC
PLC
PLC - Placecol Holdings Limited - Reviewed condensed financial results for the
year ended 28 February 2009
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")
REVIEWED CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2009
CONDENSED GROUP INCOME STATEMENTS
Reviewed Audited
February February
2009 2008
R`000 R`000
Revenue 113 761 115 266
Gross profit 74 405 79 650
Operating costs (77 272) (67 676)
Operating (loss) / profit (2 867) 11 974
Other income 932 1 255
Depreciation (1 694) (2 440)
(Loss) / profit before interest and (3 629) 10 789
taxation
Investment revenue 985 985
Finance costs (3 420) (2 063)
(Loss) / profit before taxation (6 064) 9 711
Taxation 1 444 (2 972)
(Loss) / earnings attributable to (4 620) 6 739
ordinary shareholders
Reconciliation of headline (loss) /
earnings:
(Loss) / earnings attributable to (4 620) 6 739
ordinary shareholders
Adjusted for:
Loss on sale of property, plant and 240 97
equipment
Profit on sale of intellectual (802) (1 074)
property (1)
Headline (loss) / earnings (5 182) 5 762
attributable to ordinary
shareholders
Weighted average shares in issue on 132 504 976 118 349 658
which earnings per share are based
Adjusted weighted average shares in 98 405 322 86 650 004
issue on which earnings per share
are based (2)
(Loss) / earnings per share (cents) (3.5) 5.7
Headline (loss) / earnings per share (3.9) 4.9
(cents)
Adjusted (loss) / earnings per share (4.7) 7.8
(cents) (2)
Adjusted headline (loss) / earnings (5.3) 6.7
per share (cents) (2)
Notes:
The profit on sale of intellectual property for the 2009 financial year was
realised after the sale of an internally generated cosmetic brand, "Skin PHD",
for an amount of R2.4 million with a profit after taxation of R802k.
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. The 14 293 332 ordinary
shares will be cancelled once the company is out of its closed period.
Subsequent to the annual general meeting held on 2 October 2008, adjustments
were made to the company`s audited results for the year ended 29 February 2008
as detailed in a SENS announcement dated 20 February 2009 relating to the
withdrawal and re-issue of the audited financial statements for the year ended
29 February 2008 and having regard to the terms of the Agreement a further 19
806 322 shares must be repurchased from the vendors, who are also classified as
related parties in terms of the Listings Requirements, at an aggregate
consideration of R1.00. A circular will be forwarded to shareholders in due
course to approve the final specific repurchase and cancellation of shares. The
cancellation of the 14 293 332 and 19 806 322 shares has been included in the
calculation of the adjusted earnings and headline earnings per share.
CONDENSED GROUP BALANCE SHEET
Reviewed Audited
February February 2008
2009 R`000
R`000
ASSETS
Non-current assets 36 344 31 192
Property, plant and 8 632 8 018
equipment
Intangible assets 17 173 17 642
Finance lease receivables - 69
Deferred taxation 3 856 2 229
Other financial assets 6 683 3 234
Current assets 51 568 53 576
Inventories 21 556 22 360
Loans to directors - 188
Other financial assets 5 454 2 289
Finance lease receivables - 32
Trade and other receivables 22 530 17 775
Bank and cash 2 028 10 932
Total assets 87 912 84 768
EQUITY AND LIABILITIES
Equity 47 032 51 652
Share capital 44 084 44 084
Retained earnings 2 948 7 568
Non-current liabilities 8 645 11 224
Other financial liabilities 8 105 9 544
Finance and operating lease 537 1 667
liabilities
Deferred taxation 3 13
Current liabilities 32 235 21 892
Trade and other payables 18 113 11 223
Other financial liabilities 6 144 4 003
Taxation 2 685 4 390
Finance lease obligation 337 175
Income received in advance 1 642 2 101
Bank overdraft 3 314
Total equity and liabilities 87 912 84 768
Number of shares in issue at 132 504 976 132 504 976
year-end
Adjusted number of shares in 98 405 322 98 405 322
issue at year-end (1)
Net asset value per share 35.5 39.9
(cents)
Net tangible asset value per 22.5 25.7
share (cents)
Adjusted net asset value per 47.8 52.5
share (cents)
Adjusted net tangible asset 30.3 34.6
value per share (cents)
Note:
Refer to Note 2 under the income statement.
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 10 19 976 19 986 829 20 815
2007
Changes in
equity: Share
premium
Profit for the 6 739 6 739
year
Issue of shares 3 28 502 28 505 28 505
Issue costs (2 007) (2 007) (2 007)
written off
Treasury shares (2 400) (2 400) (2 400)
held
Total changes 3 24 095 24 098 6 739 30 837
Balance 1 March 13 44 071 44 084 7 568 51 652
2008
Loss for the year - - - (4 620) (4 620)
Balance 28 13 44 071 44 084 2 948 47 032
February 2009
CONDENSED GROUP CASH FLOW STATEMENTS
Reviewed Audited
12 months 12 months
February February
2009 2008
R`000 R`000
Cash flows from operating (5 869) (16 671)
activities
Cash flow from investing (6 855) 326
activities
Cash flow from financing 507 21 174
activities
Net (decrease)increase in cash and (12 217) 4 829
cash equivalents
Cash and cash equivalents at 10 932 6 103
beginning of period
Cash and cash equivalents at end (1 285) 10 932
of period
CONDENSED SEGMENT REPORT
Reviewed Audited
12 months 12 months
February February
2009 2008
R`000 R`000
Revenue
Brands 85 345 84 851
Supply chain and support 28 416 30 415
113 761 115 266
(Loss) / profit before interest
and taxation
Brands (2 462) 8 914
Supply chain and support (1 167) 1 875
(3 629) 10 789
Depreciation
Brands 1 110 1 874
Supply chain and support 584 566
1 694 2 440
"Brands" include those companies directly involved in the market growth 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 hereby present the reviewed annual financial results
for the year ended 28 February 2009 ("the 2009 year"). The decrease in revenue
is mainly as a result of company-owned stores which were sold to franchisees
where the group now earns royalties without the associated expenses instead of
gross revenue and expenses previously recognised. This trend may continue as
the group is focusing on a franchisor revenue model.
The year under review was a very challenging year for the following reasons:
The stringent requirements demanded by banks relative to the extension of credit
to franchisees 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 restructuring of the financial department was completed in the second half
of the financial year and the benefit was only experienced in the last quarter
of 2009.
Company-owned stores opened during the last two financial years contributed to
losses of R3.6 million during 2009.
Certain once-off costs, were also incurred by the group during the financial
year:
Products development costs of approximately R1 million;
Export development cost of approximately R1 million incurred prior to the export
of Placecol products to the United States of America and into Africa;
Restructuring cost of underperforming departments of approximately R1.5 million;
and
The relocation of the company`s manufacturing arm, CW Pharmaceuticals, to
Sunderland Ridge.
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. As at the end of February 2009, the
group`s products were distributed to 410 outlets which include 62 Placecol
Beauty Centres, 49 Dream Nails and Body (DNB) salons, (company-owned and
franchised), 20 Foschini outlets, 116 Edgars outlets and 163 pharmacies. For
the 2009 year, the group continued its drive to grow its geographical footprint
and this has been achieved through the roll-out of beauty outlets in the
following areas: Klerksdorp, Kennilworth, Bedfordview, Cobblewalk, Hartbeespoort
Dam, Richards Bay, Woodmead, Zevenwacht, Cavendish Glen - with the additional
benefit on increased product and equipment sales.
The Placecol Beauty Centre base grew from to 53 salons to 62 reflecting an
increase of 17%. The acceptance and desirability of the brand is also evident in
the demand to own a Placecol Beauty Centre, as well as the recent success at the
Franchise Association of South Africa (FASA) awards ceremony where the company
received the following two awards:
Newcomer Franchisor of the Year; and
Most promising Female Franchisee of the Year.
In February 2008 the group had 19 franchisees, by February 2009 there were 46
franchisees and during the 1st quarter of the 2010 financial year, a further 5
Beauty Centres were franchised.
The group`s brands and national footprint strengthened significantly during the
2009 year. Since 2004, 62 Placecol Beauty Centres have been opened by the group
and with the inclusion of DNB stores the group has a healthy national footprint
of 111 stores.
Through the DNB acquisition in the prior financial year, the group acquired a
further 44 stores which have since been expanded to 49, taking into
consideration that 4 stores have been de-franchised. This provides the group
with a commanding position as the largest national salon chain and the largest
franchisor in the health and beauty industry in South Africa.
The following corrective measures have been taken by the directors to ensure
that losses are minimized:
A complete restructuring of DNB during the last quarter of the 2009 year and the
relocation of the DNB Head Office to Placecol Head Office will result in an
annual saving of approximately R2.4 million in salaries (before tax);
Continuous strict financial discipline will result in further decreases in
operating expenses;
The restructuring of sales personnel to self-employed consultants nation-wide,
will have an expected additional saving of R1.5 million per annum on the salary
bill;
An exceptional effort has been exerted to increase profitability of company-
owned stores. All efforts will be on selling all company-owned stores in this
financial year, which will not only result in the unlocking of cash by reducing
the inventory by R12.8 million but also increase the profitability of the group
as a whole.
In addition to the corrective measures which the directors have implemented,
the company expects better trading conditions at the end of February 2010 due to
the recent lowering of interest rates.
FINANCIAL RESULTS
Company revenue decreased marginally by 1.3% to R113.8 million (2008: R115.3
million). The decrease in revenue is mainly as a result of royalties earned by
the group without the associated expenses instead of gross revenue and expenses
previously recognised. 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 decreased by 6.6% to R74.4 million (2008: R79.6 million) as a
result of an increase in manufacturing costs as well as a different sales mix
(franchise outlets being sold versus product sales), resulted in the gross
profit percentage decreasing 5.3% from 69.1% in 2008 to 65.4% in 2009. Operating
costs increased 14% to R77.2 million (2008: 67.7 million) which include the
group`s restructuring and once-off non-recurring costs mentioned under the
overview.
Losses attributable to ordinary shareholders decreased by 169% to R4.6 million
(Profit 2008: R6.7 million). Adjusted loss per share decreased by 160% to 4.7
cents (Earnings 2008: 7.8 cents) and adjusted headline loss per share decreased
by 178% to 5.3 cents (Earnings 2008: 6.7 cents
Inventories decreased slightly during the 2009 year to R21 million. R12.8
million relates to company-owned stores available for sale as franchises.
Included in trade receivables and other financial assets, is an amount of R6.7
million which relates to franchisee 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 reviewed condensed financial statements comprise a consolidated balance
sheet at 28 February 2009, a consolidated income statement, consolidated
statement of changes in equity and summarised consolidated cash flow statement
for the year ended 28 February 2009. The reviewed 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 and method of measurement and recognition applied in
preparation of the audited consolidated annual financial statements are
consistent with those applied in the group`s annual financial statements for the
year ended 29 February 2008, which comply with International Financial Reporting
Standards.
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.
PROSPECTS
A further 10 Placecol Beauty Centres and five DNB outlets are scheduled to be
opened during the 2010 year. Four outlets have already been opened during the
first quarter of 2010. It is expected that the group will reach a total of 126
franchised outlets in South Africa during 2010.
The investment made in 2009 to grow exports has resulted in the selling of a
Master Franchise Agreement for Africa, resulting in the first dual DNB/Placecol
Beauty Centre being opened in Lagos, Nigeria. The next dual store in Abudja,
Nigeria will open soon with further stores to be opened during the year.
Revenue is expected from product sales, equipment sales and royalties.
The distributor of Placecol products in the USA has established distributions
points in California, Texas, Tennessee and Georgia with orders being received
from them on a monthly basis. Sales into this huge market look promising
despite the melt-down of the USA economy and good growth is expected.
Enquiries for Master Franchise Agreements and/or distribution rights for Ireland
are presently in the planning phase with negotiations currently in process in
South East Asia.
POST BALANCE SHEET EVENTS
The board proposes to change the name of the holding company from Placecol
Holdings Limited to Skinwell Holdings Limited in order to more accurately
reflect the nature of its multi-brand owner business and to create a platform
for the future growth of the company.
DIVIDEND POLICY
In line with its policy, the group will not pay a dividend for the 2009 year.
It is Placecol`s long term intention to pay dividends and the existing policy
will be reconsidered as its rate of growth slows and in the light of market
conditions and anticipated cash requirements for the business.
STATEMENT OF GOING CONCERN
The reviewed condensed financial statements for the year ended 28 February 2009
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
29 May 2009
W J de Wet S Morgan
Chief Executive Officer Chief Financial Officer
CORPORATE INFORMATION
Non executive and independent directors: C
Nkosi; T J Schoeman
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: 29/05/2009 16:17:02 Produced by the JSE SENS Department.
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