| Tue 29 Sep 2009, 16:27 | | SKW - Skinwell - Unaudited Condensed Interim Financial Results For The Six |
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SKW
SKW
SKW - Skinwell - Unaudited Condensed Interim Financial Results For The Six
Months Ended 31 August 2009, Change To The Board Of Directors And Renewal Of
Cautionary Announcement
SKINWELL HOLDINGS LIMITED
(formerly Placecol Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
JSE code: SKW
ISIN: ZAE000135893
("Skinwell" or "the company" or "the group")
UNAUDITED CONDENSED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
2009, CHANGE TO THE BOARD OF DIRECTORS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
Condensed Group Income Statements
Unaudited Unaudited Audited
6 months 6 months 12 months
August August February
2009 2008 2009
R`000 R`000 R`000
Revenue 45 874 60 839 113 761
Cost of sales (19 118) (24 406) (39 355)
Gross profit 26 756 36 433 74 406
Operating expenses (31 192) (40 151) (78 967)
Operating (loss)/profit (4 436) (3 718) (4 561)
Other income 1 376 6 137 932
Impairment of goodwill - - (6 982)
Investment revenue 675 - 985
Loss in associate (479) - -
Finance costs (1 589) (495) (3 420)
(Loss)/Profit before (4 453) 1 924 (13 046)
taxation
Taxation 1 250 (577) 1 444
(Loss)/Profit attributable (3 203) 1 347 (11 602)
to ordinary shareholders
Reconciliation of headline
(loss)/earnings:
(Loss)/Profit attributable (3 203) 1 347 (11 602)
to ordinary shareholders
Adjusted for: -
(Profit)/Loss on disposal (577) 240
of property, plant and
equipment
Profit on sale of business - - (802)
unit
Impairment of goodwill - - 6 982
Headline (loss)/earnings (3 780) 1 347 (5 182)
attributable to ordinary
shareholders
Weighted average shares in 98 405 322 132 504 132 504
issue 976 976
Fully diluted weighted 236 172 - -
average shares in issue (1) 773
(Loss)/Earnings per share (3.3) 1.0 (8.8)
(cents)
Headline (loss)/earnings (3.8) 1.0 (3.9)
per share (cents)
Fully diluted loss per (1.4) - -
share (cents)
Fully diluted headline loss (1.6) - -
per share (cents)
Note:
(1) The fully diluted weighted average shares in issue after the claw-back
rights offer as set out in the Post Balance Sheet Events and Share Capital
paragraph.
Condensed Group Balance Sheets
Unaudited Unaudited Audited
August August February
2009 2008 2009
R`000 R`000 R`000
ASSETS
Non-current assets 29 090 37 738 28 240
Property, plant and 7 604 9 043 8 632
equipment
Goodwill and intangible 9 961 21 029 10 191
assets
Deferred tax 4 349 1 481 3 856
Other financial assets 7 176 6 185 5 561
Current assets 48 269 55 234 52 689
Inventories 19 284 21 120 21 556
Other financial assets 9 567 2 081 12 408
Trade and other receivables 19 418 27 813 16 697
Cash and cash equivalents - 4 220 2 028
Total assets 77 359 92 972 80 929
EQUITY AND LIABILITIES
Equity 36 847 56 022 40 050
Share capital 44 084 47 451 44 084
Retained earnings (7 237) 8 571 (4 034)
Non-current liabilities 12 578 13 147 6 464
Shareholders` loans (1) 6 888 - -
Other financial liabilities 5 151 13 137 5 923
Finance lease obligation 306 - 306
Operating lease liability 233 - 232
Deferred taxation - 10 3
Current liabilities 27 934 23 803 34 415
Trade and other payables 16 508 13 868 18 112
Other financial liabilities 6 379 4 152 8 326
Current tax payable 941 3 162 2 685
Finance lease obligation 297 - 337
Income received in advance - 689 1 642
Bank overdraft 3 809 1 932 3 313
Total equity and 77 359 92 972 80 929
liabilities
Number of shares in issue 98 405 322 132 504 132 504 976
at period end 976
Net asset value per share 37.4 42.3 30.2
(cents)
Net tangible asset value 27.3 26.4 22.5
per share (cents)
Fully diluted net asset 18.5 - -
value per share (cents)
Fully diluted net tangible 14.3 - -
asset value per share
(cents)
Note:
(1) As announced on 23 July 2009 Skinwell finalised terms in order to raise
R6 888 372.55 by way of a claw-back renounceable rights offer of
137 767 451 new ordinary shares ("rights offer shares" or "subscription
shares") to Skinwell ordinary shareholders at a subscription price of R0.05
per rights offer share ("subscription price") in the ratio of 140 rights
offer shares for every 100 Skinwell shares held ("rights offer").
Condensed Group Statements of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months 12 months
August August February
2009 2008 2009
R`000 R`000 R`000
Balance at beginning of 40 050 54 675 51 652
period
Net (loss)/profit for the ( 3 203) 1 347 (11 602)
period
Balance at end of period 36 847 56 022 40 050
Condensed Group Cash Flow Statements
Unaudited Reviewed Audited
6 months 6 months 12 months
August August February
2009 2008 2009
R`000 R`000 R`000
Cash flows from operating (7 150) (5 616) (36)
activities
Cash flows from investing 7 385 (4 753) (12 688)
activities
Cash flows from financing (2 759) 1 725 507
activities
Net increase in cash and cash (2 524) (8 644) (12 217)
equivalents
Cash and cash equivalents at (1 285) 10 932 10 932
beginning of period
Cash and cash equivalents at (3 809) 2 288 (1 285)
end of period
Segmental Reporting
Unaudited Reviewed Audited
6 months 6 months 12 months
August August February
2009 2008 2009
R`000 R`000 R`000
Revenue
Brands 37 543 29 762 90 441
Supply chain support 8 331 31 077 35 200
Adjustments and eliminations - - (11 880)
45 874 60 839 113 761
Segment (loss)/profit
Brands (94) 3 212 (13 255)
Supply chain support (3 109) (1 865) 75
Adjustments and eliminations - - 1 578
(3 203) 1 347 (11 602)
Depreciation and amortisation
Brands 452 975 1 121
Supply chain support 427 310 549
Adjustments and eliminations - - 24
879 1 285 1 694
OVERVIEW
The directors of Skinwell present the unaudited interim results for the six
months ended 31 August 2009 ("interim period"). The results for the period were
characterised by a combination of positive and negative factors. On the positive
side the group experienced an increase in system-wide sales revenue of 11% to
R48.5 million (2008: R43.8 million) in respect of its franchise system for the
Placecol and DNB brands for the six months ended 31 August 2009 despite
difficult market conditions and competitive pressure.
On the negative side, the group experienced severe negative cash flow pressure
as a result of the continued delay in payments from banks to Skinwell on the
disposal of company-owned stores to new franchisees as well as the pressure of
reduction of inventory levels at large retailers and franchisees (due to the
economic environment), which stock Placecol and DNB products, and which also had
a negative impact on revenue for the interim period. In addition the prior
comparative period included a higher number of company-owned stores versus
franchised outlets on which the Skinwell group recognised all revenue (treatment
and product revenue) versus only products sales and royalty income on franchised
stores.
As detailed in its Annual Report for the 2009 financial year and as per the
announcement on SENS on 21 September 2009, a decision was taken by the directors
to focus on the group`s core activities, being a franchisor and owner of brands.
On 22 September 2009, Skinwell announced the disposal of its first non-core
operation being the Placecol Beauty Institute to the Centurion Academy (Pty)
Limited for a consideration of R700 000. The Skinwell group will continue to
provide in-house training to its franchisees and company-owned stores. In terms
of a further cautionary announcement also dated 22 September 2009, the group has
entered into negotiations for the disposal of CW Pharmaceuticals (Pty) Limited,
the contract manufacturing arm of the group.
The company`s policy to open and operate company-owned stores before securing a
franchisee has resulted in the company still operating 9 Placecol and 7 DNB
outlets at the end of August 2009. The group`s strategy remains to sell these
stores, once a suitable franchisee has been found, and therefore the company
will always retain some loss making stores. The total loss before tax incurred
by these company-owned stores during the interim period amounted to R2.9
million. The focus for the second half of the 2010 financial year will be to
sell the profitable stores and to consider the closure of the remaining stores
in order to minimise any losses going forward. In future, stores will only be
opened once a suitable franchisee and location has been secured.
The name of the holding company was changed from Placecol Holdings Limited to
Skinwell Holdings Limited with effect from 27 July 2009 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.
Three new Placecol stores were opened and two stores were mothballed during the
interim period which increased the number of Placecol outlets to 63 at the end
of August 2009, with a further two Placecol stores scheduled for opening by
October 2009. During the interim period the group opened one new DNB store,
defranchised one store, closed four DNB stores and during August 2009 mothballed
a further 3 DNB stores which decreased the number of DNB outlets at the end of
August 2009 to 42.
FINANCIAL RESULTS
Group revenue decreased by 25% to R45.9 million (2008: R60.8 million) during the
interim period, mainly as a result of fewer new stores being opened, the
downturn in the economy as well as stock reductions by retail and franchised
outlets. Gross profit decreased to R26.8 million (2008: R36.4 million) and
gross profit margins decreased 2% to 58% (2008: 60%), due to stock provisions
and returns encountered during the interim period. Management will focus on
restoring gross profit margins in the second half of the financial year.
Operating expenses decreased 22% to R31.2 million (2008: R40.2 million). The
cost savings are mainly as a result of:
- restructuring of personnel;
- reduction of company owned stores;
- more effective cost control.
The majority of cost savings were only implemented towards the latter part of
the interim period and the benefits are expected to become evident during the
second half of the 2010 financial year. Detailed monthly financial reports are
available with regard to the performance of company-owned stores, enabling
management to implement corrective action plans instantly.
Profit before taxation decreased from a R1.9 million profit in 2008 to a loss of
R4.5 million in the interim period as a result of the decrease in turnover as
well as lower gross profit margins achieved by the group. Headline earnings
reflected a loss of R3.8 million compared to a profit of R1.3 million for the
comparative period.
The R1.8 million decrease in inventory to R19.3 million during the interim
period (2008: R21.1 million) was as a result of a focussed drive to reduce total
inventory holding. This is an ongoing process until suitable levels of
inventory are achieved together with improved working capital management.
The group has no material capital commitments for the purchase of property,
plant and equipment as at 31 August 2009.
PROSPECTS
The main drive by the board is to focus on the core business activities of the
group and to ensure that franchisees in the network obtain products and support
of a very high standard. An assessment was conducted on the various companies
and functions within the group and these are all in various stages of
completion. This re-focus on core business will ensure that the franchise
footprint that already exsists, both within the Placecol and DNB brands, is
optimised and that the basics are in place to enable the group to grow its
footprint in future.
The current group structure is also being revised to ensure optimisation of
resources, a reduction in costs, the elimination of non profitable functions and
to simplify management. It is envisaged that the new company structure will be
in place from 1 October 2009.
Operating expenses are continuously reviewed and reduced where possible and this
process will continue for the remainder of the financial year to ensure that
operating expenses are reduced in line with the streamlining process.
The group`s focus for the remainder of the financial year will be to ensure that
the current base is strong and sustainable and that the group will be in a
position to focus on controlled growth going forward.
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.
POST BALANCE SHEET EVENTS AND SHARE CAPITAL
In terms of an announcement, dated on 23 July 2009, Skinwell finalised terms to
raise R6 888 372.55 by way of a claw-back renounceable rights offer of
137 767 451 new ordinary shares ("rights offer shares") to Skinwell ordinary
shareholders at a subscription price of R0.05 per rights offer share in the
ratio of 140 rights offer shares for every 100 Skinwell shares held. The
finalisation date announcement was released on SENS on 23 September 2009.
The Placecol Beauty Institute, a small non-core division of Placecol Cosmetics
(Pty) Limited, a wholly-owned subsidiary of Skinwell was disposed of with effect
from 1 September 2009 for a consideration of R700 000. The Skinwell group will
continue to provide in-house training to all its franchisees and company-owned
outlets.
The company has also entered into negotiations to dispose of CW Pharmaceuticals
(Pty) Limited, its manufacturing arm.
DIRECTORATE
With effect from 29 September 2009 Skinwell strenghtened its board to
appropriately facilitate the group`s recent restructuring. As a result,
executive directors WJ Wet and CW Moolman resigned from the board of the company
to pursue personal business interests. SF Grobbelaar and JM Swart will join the
board as executive directors and MM Patel will join the board as an independent
non-executive director.
The reconstituted board of the company now comprises: TJ Schoeman (Executive
Chairman), LJ Rudolph (FD), SF Grobbelaar, JM Swart, C Nkosi* and MM Patel*
(Chairperson of Audit Committee) (*independent non-executive).
SF Grobbelaar, joined the group in May 2009 as the General Manager of Placecol
Cosmetics. He gained 8 years` valuable experience as National Sales and
Operations Manager for McCain Foods South Africa before joining Skinwell.
JM Swart has experience in various fields, such as: Operations Management,
General Management, Sales Management, Product Management, Strategic Management,
Marketing Management, Sales / Account Management, Information Technology
Management, Product Management and Project Planning. During the past 12 years,
he has been employed mainly by large organisations, such as Nedbank, Imperial
Bank, SAP AG, and Microsoft Corporation.
MM Patel is a Chartered Accountant and has a BCompt Honours in financial
accounting, financial management, taxation and auditing. He is currently the
Managing Partner at Nkonki Incorporated.
The board would like to thank WJ Wet and CW Moolman for their contribution to
the group and takes this opportunity of wishing them well for the future.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the going-concern basis since the
directors have every reason, following the implementation of the claw-back offer
and the disposal of non-core business units, 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.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution when dealing in the
company`s shares until a further announcement is made relating to the proposed
disposal of CW Pharmaceuticals (Pty) Limited.
By order of the Board
29 September 2009
Theo Schoeman LJ Rudolph
Executive Chairperson Financial Director
CORPORATE INFORMATION
Non executive and independent directors: C Nkosi; MM Patel
Executive directors: TJ Schoeman (Chairman); LJ Rudolph (FD);
JM Swart; SF Grobbelaar
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
Lead Designated Adviser: Grindrod Bank Limited
Corporate Adviser and Designated Adviser: Vunani Corporate
Finance
Date: 29/09/2009 16:27:01 Produced by the JSE SENS Department.
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