| Mon 31 May 2010, 13:42 | | SKW - Skinwell - Reviewed preliminary condensed consolidated financial |
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SKW
SKW
SKW - Skinwell - Reviewed preliminary condensed consolidated financial
results for the year ended 28 February 2010
SKINWELL HOLDINGS LIMITED
(formerly Placecol Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)a
JSE code: SKW
ISIN: ZAE000135893
("Skinwell" or "the company" or "the group")
REVIEWED PRELIMINARY CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE
YEAR ENDED 28 FEBRUARY 2010
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
February February
2010 2009
R`000 R`000
Revenue 69 894 113 761
Gross profit 35 547 74 405
Operating costs (68 862) (78 966)
Operating loss (33 315) (4 561)
Other income 5 312 932
Impairment of goodwill (2 439) (6 982)
Loss before interest and taxation (30 442) (10 611)
Investment income 1 521 985
Finance costs (3 702) (3 420)
Loss before taxation (32 623) (13 046)
Taxation 8 441 1 444
Total comprehensive loss attributable to (24 182) (11 602)
ordinary shareholders
Reconciliation of headline loss:
Loss attributable to ordinary shareholders (24 182) (11 602)
Adjusted for:
(Profit)/Loss on sale of property, plant and (718) 240
equipment
Profit on disposal of subsidiary (445) -
Impairment of goodwill 2 439 6 982
Profit on sale of intellectual property - (802)
Headline loss attributable to ordinary (22 906) (5 182)
shareholders
Number of ordinary shares in issue on which
earnings per share are based
- weighted average 155 364 544 132 504 976
- diluted weighted average 155 364 544 132 504 976
Loss per share (cents) (15.6) (8.8)
Diluted loss per share (cents) (15.6) (8.8)
Headline loss per share (cents) (14.7) (3.9)
Diluted headline loss per share (cents) (14.7) (3.9)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
February February 2009
2010 R`000
R`000
ASSETS
Non-current assets 25 896 28 240
Property, plant and equipment 6 377 8 632
Goodwill and intangible assets 7 704 10 191
Other financial assets 700 5 561
Deferred taxation 11 115 3 856
Current assets 35 542 52 689
Inventories 13 521 21 556
Other financial assets 9 194 12 408
Current tax receivable 340 -
Trade and other receivables 12 366 16 697
Bank and cash 121 2 028
Total assets 61 438 80 929
EQUITY AND LIABILITIES
Equity 21 613 40 050
Share capital 49 830 44 084
Retained earnings (28 217) (4 034)
Non-current liabilities 6 466 6 464
Shareholders` loans 515 -
Other financial liabilities 5 638 5 923
Finance and operating lease 310 538
liabilities
Deferred taxation 3 3
Current liabilities 33 359 34 415
Trade and other payables 17 203 18 112
Other financial liabilities 9 282 8 326
Taxation 1 108 2 685
Finance lease obligation 312 337
Deferred income - 1 642
Bank overdraft 5 454 3 313
Total equity and liabilities 61 438 80 929
Number of ordinary shares in issue at 236 172 773 132 504 976
year-end
Net asset value per share (cents) 9.2 30.2
Net tangible asset value per share 5.9 22.5
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Total Accumulated Total
capital premium share profit / equity
R`000 R`000 capital (loss) R`000
R`000 R`000
Balance 1 March 2008 13 44 071 44 084 7 568 51 652
Total comprehensive loss (11 603) (11 603)
for the year
Balance 1 March 2009 13 44 071 44 084 (4 035) 40 049
Total comprehensive loss (24 182) (24 182)
for the year
Issue of shares 11 6 874 6 885 6 885
Issue costs written off (1 139) (1 139) (1 139)
Total changes 11 5 735 5 746 (24 182) (18 436)
Balance 28 February 2010 24 49 806 49 830 (28 217) 21 613
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
February February
2010 2009
R`000 R`000
Cash flows from operating activities (17 495) (36)
Cash flows from investing activities 6 760 (12 688)
Cash flows from financing activities 6 687 507
Net decrease in cash and cash equivalents (4 048) (12 217)
Cash and cash equivalents at beginning of period (1 285) 10 932
Cash and cash equivalents at end of period (5 333) (1 285)
CONDENSED CONSOLIDATED SEGMENT REPORT
Reviewed Audited
February February
2010 2009
R`000 R`000
Revenue
Brands 57 154 90 441
Supply chain and support 14 369 35 200
Inter-segment (1 629) (11 880)
69 894 113 761
Total comprehensive loss attributable to
ordinary shareholders
Brands (24 185) (13 255)
Supply chain and support (423) 75
Inter-segment 426 1 578
(24 182) (11 602)
Depreciation
Brands 794 1 169
Supply chain and support 487 549
Inter-segment (24) (24)
1 257 1 694
"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. The
manufacturing facility and training division were sold during the
year.
OVERVIEW
The directors of Skinwell herewith present the reviewed annual
financial results for the year ended 28 February 2010 ("the 2010
year"). The year continued to be very challenging, but dynamic, and
was marked by on-going restructuring, the completion of a claw-back
rights offer for R6.9 million in November 2009 and the disposal of
loss making entities such as the manufacturing subsidiary and the
training division, as part of the overall turnaround strategy of the
company.
Cost of sales include fair value adjustments for corporate stores
recorded in the accounting records of the group to the amount of R8.1
million and operating expenses include the write-off and provision for
bad debts to the amount of R8.6 million. Since the restructuring of
the group commenced, monthly overhead costs were reduced by more than
R2 million per month.
The 2010 year was marked by major restructuring which included the
cancellation of shares issued to the founders and executive management
team due to a lack of performance. The resignation of the founders and
executives of the company in September 2009 and a further
restructuring of senior management was required subsequent to the
financial year end (May 2010). Both these events posed further
challenges for the overall turnaround strategy of the company.
Turnover reduced 39% to R70 million mainly as a result of a reduction
in sales to independent outlets of 47% and royalties earned instead of
gross revenue. Overall sales to independent and franchised outlets
(which include corporate stores decreased 27% due to a down-turn in
the economy and reduced marketing activity by the group during the
year. The group`s system-wide sales on retail sales and services
rendered on behalf of the Placecol and Dreamnails & Body outlets
(franchised and company-owned stores) grew by 14% to R106 million (R93
million: 2009) during difficult trading conditions.
The closure of three company-owned stores, in underperforming retail
centres, that were opened prior to the down-turn in the economy, were
inevitable, but part of the turnaround strategy of the company.
Certain stores were also de-franchised due to non-compliance with
franchise agreements. One of the group`s ongoing challenges is to
find and retain qualified beauty therapists in its national footprint,
which consists of more than 100 beauty outlets nationwide.
FINANCIAL RESULTS
Company revenue decreased by 39% to R70 million (2008: R114 million).
The decrease in revenue is as a result of:
- a reduction in sales to independent retailers as a result of the
down-turn in the economy, which necessitated independent retailers to
reduce their stock holding and to rationalise their product offering;
- royalties earned by the group instead of gross revenue; and
- the disposal of the loss-making entities, with effect from 1
September 2009.
Gross profit decreased by 52% to R36 million (2009: R74 million) as a
result of a fair value adjustment of R8.1 million of certain corporate
stores to net realisable value. By removing the fair value adjustment
on corporate stores, gross profit margins reduced 3% to 62% due to
stock provisions and write offs. Operating costs decreased by 13% to
R69 million (2009: R79 million) as a result of most of the savings on
the loss making entities only implemented during the latter part of
the financial year. Operating expenses include the write-off and
provision for bad debts to the amount of R8.6 million (2009: R1.9
million).
Losses attributable to ordinary shareholders increased more than 100%
to R24 million (2009: R12 million). Loss per share increased by 77%
to 15.6 cents (2009: 8.8 cents) and headline loss per share increased
by more than 200% to 14.7 cents (2009: 3.9 cents).
Inventories decreased as a result of corporate stores being adjusted
to net realisable value.
As a result of the losses incurred by subsidiary companies goodwill
was impaired by R2.4 million.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
The consolidated annual financial statements have been prepared in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards "IFRS", the AC 500
Standards as issued by the Accounting Practices Board, the
presentation and disclosure requirements of IAS 34 - Interim Financial
Reporting, the Listings Requirements of the JSE Limited and the
requirements of the South African Companies Act 61, 1973, as amended.
The accounting policies and method of measurement and recognition
applied in preparation of the reviewed consolidated annual financial
statements are consistent with those applied in the group`s annual
financial statements for the year ended 28 February 2009, which comply
with IFRS.
These condensed consolidated annual financial statements incorporate
the financial statements of the company and its subsidiaries.
AUDIT OPINION
The auditors, SAB&T, have reviewed the preliminary condensed
consolidated annual financial statements for the year ended 28
February 2010. The auditors` unmodified review report is available for
inspection at the company`s registered office.
PROSPECTS
The group remains cautious after the implementation of the
restructuring initiatives which benefits will shortly be realised. In
terms of the group`s turnaround strategy, the services of key
management (Placecol National Sales Executive and one of the trainers)
with relevant industry experience who resigned from the company more
than a year ago were re-deployed into the sales and training divisions
which should have long-term benefits for the organisation. The
Logistics Manager who worked for the group for more than 10 years was
also re-employed. The overhead cost structure will be monitored
closely and further cost savings will be implemented where
appropriate.
The group has formed certain strategic alliances to strengthen its own
inhouse research on product development and innovation, and as part of
this strategic vision will launch innovative new treatments in salons
in July 2010. As the group is a marketing and sales organisation
where brand perceptions are critical, focus will shift again to above
the line marketing activities.
After more than a year`s testing and research of the Placecol Zambesi
outlet (combination store that include all the elements of a Placecol
(skincare), Dreamnails & Body (nailcare) and hair outlet), the newly
branded "World of Beauty" combination outlet was opened in Clearwater
Mall, Johannesburg on 1 May 2010.
The group will continue to open Placecol and Dreamnails & Body outlets
where appropriate, such as the recently opened Placecol in Sea Point,
Cape Town and also plans to open a new Placecol store in the Eastern
Cape in July 2010. To ensure that individual franchised or corporate
stores generate more revenue, service and retail offerings are
increased where appropriate.
CHANGES TO THE BOARD
The following changes to the board occurred since the previous
reporting period:
Resignations
- WJ de Wet
- CW Moolman
- C Nkosi
- LJ Rudolph
- JM Swart
- SF Grobbelaar
Appointments
- MM Patel (independent non-executive director)
- GSJ van Nieuwenhuizen (independent non-executive director)
- WP van der Merwe (non-executive director)
- E Colyn (Chief Executive Officer)
Subsequent to the restructuring, TJ Schoeman, previously executive
Chairman will now assume the position of non-executive Chairman of the
group. The board is in the process of finding a suitable Financial
Director for the group.
SUBSEQUENT EVENTS
There are no subsequent events to report on.
DIVIDEND POLICY
The group will not pay a dividend for the 2010 year.
STATEMENT OF GOING CONCERN
The financial statements have been prepared on the going concern basis
as the directors are of the view that the group has adequate resources
in place to continue in operation for the foreseeable future.
By order of the Board
31 May 2010
T J Schoeman E Colyn
Non-Executive Chairman Chief Executive Officer
CORPORATE INFORMATION
Non-executive directors: T J Schoeman; G S J van Nieuwenhuizen*; M M Patel*; W
P van der Merwe
* Independent
Executive director: E Colyn
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: (012) 621 3300
Facsimile: (012) 621 3369
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Grindrod Bank Limited
Date: 31/05/2010 13:42:01 Produced by the JSE SENS Department.
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