| Tue 30 Nov 2010, 13:43 | | SKW - Skinwell - Reviewed condensed interim financial results for the six months |
|
SKW
SKW
SKW - Skinwell - Reviewed condensed interim financial results for the six months
ended 31 August 2010
SKINWELL 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")
REVIEWED CONDENSED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
2010
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2010 August 2009 February
R`000 R`000 2010
R`000
Revenue 26 649 45 874 69 894
Cost of sales (7 427) (19 118) (34 351)
Gross profit 19 222 26 756 35 543
Other income 1 326 1 376 5 311
Operating expenses (20 532) (30 313) (69 223)
Impairment of goodwill - - (2 439)
Earnings/(losses) before 16 (2 181) (30 808)
interest, tax, depreciation
and amortisation
Depreciation and (386) (879) (1 257)
amortisation
Operating loss (370) (3 060) (32 065)
Investment revenue 479 675 1 521
Finance costs (1 210) (1 589) (3 702)
Loss in associate - (479) -
Loss before taxation (1 101) (4 453) (34 246)
Taxation 836 1 250 8 441
Loss attributable to (265) (3 203) (25 805)
ordinary shareholders
Other comprehensive income - - -
Total comprehensive loss (265) (3 203) (25 805)
attributable to ordinary
shareholders
Reconciliation of headline
loss:
Loss attributable to (265) (3 203) (25 805)
ordinary shareholders
Adjusted for:
(Profit)/Loss on disposal 47 (577) 804
of non-current assets
Loss on disposal of - - 1 212
subsidiary
Impairment of goodwill - - 2 439
Headline loss attributable (218) (3 780) (21 350)
to ordinary shareholders
Weighted average shares in 236 172 773 98 405 322 155 364 544
issue
Fully diluted weighted 236 172 773 236 172 773 236 172 773
average shares in issue
Loss per share (cents) (0.1) (3.3) (16.6)
Headline loss per share (0.1) (3.8) (13.7)
(cents)
Fully diluted loss per (0.1) (1.4) (10.9)
share (cents)
Fully diluted headline loss (0.1) (1.6) (9.0)
per share (cents)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed Unaudited Audited
August 2010 August 2009 February
R`000 R`000 2010
R`000
ASSETS
Non-current assets 28 834 29 090 26 326
Property, plant and 6 016 7 604 5 109
equipment
Goodwill and intangible 7 264 9 961 6 888
assets
Other financial assets 3 241 7 176 3 223
Deferred tax 12 313 4 349 11 106
Current assets 26 377 48 269 30 798
Inventories 13 605 19 284 10 051
Other financial assets 5 077 9 567 9 194
Current tax receivable 165 - 165
Trade and other receivables 7 169 19 418 11 267
Cash and cash equivalents 361 - 121
Total assets 55 211 77 359 57 124
EQUITY AND LIABILITIES
Equity 19 727 36 847 19 992
Share capital 49 830 44 084 49 830
Retained earnings (30 103) (7 237) (29 838)
Non-current liabilities 5 470 12 578 5 755
Shareholders` loans - 6 888 -
Other financial liabilities 5 157 5 151 5 442
Finance lease obligation 30 306 129
Operating lease liability 283 233 181
Deferred taxation - - 3
Current liabilities 30 014 27 934 31 377
Loans from shareholders 2 472 - 164
Other financial liabilities 7 743 6 379 9 343
Current tax payable 988 941 860
Finance lease obligation 247 297 312
Trade and other payables 13 760 16 508 15 709
Bank overdraft 4 804 3 809 4 989
Total equity and 55 211 77 359 57 124
liabilities
Number of shares in issue 236 172 773 132 504 976 236 172 773
at period end
Net asset value per share 8.4 42.3 8.5
(cents)
Net tangible asset value 5.3 26.4 5.5
per share (cents)
Condensed Group Statement of Changes in Equity
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2010 August 2009 February
R`000 R`000 2010
R`000
Balance at beginning of 19 992 40 050 40 050
period
Total comprehensive loss (265) (3 203) (25 805)
for the period
Issue of shares - - 6 885
Share issue costs - - (1 138)
Balance at end of period 19 727 36 847 19 992
Condensed Group Statement of Cash Flows
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2010 August 2009 February
R`000 R`000 2010
R`000
Cash flows from operating (2 210) (7 150) (18 333)
activities
Cash flows from investing 2 377 7 385 5 508
activities
Cash flows from financing 258 (2 759) 9 242
activities
Net increase in cash and 425 (2 524) (3 583)
cash equivalents
Cash and cash equivalents (4 868) (1 285) (1 285)
at beginning of period
Cash and cash equivalents (4 443) (3 809) (4 868)
at end of period
Group Segment Report
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2010 August 2009 February
R`000 R`000 2010
R`000
Revenue
Brands 27 189 37 543 57 153
Supply chain support - 8 331 14 369
Inter-segment (540) - (1 628)
26 649 45 874 69 894
Segment (loss)/profit
Brands (265) (94) (24 185)
Supply chain support - (3 109) (423)
Adjustments and - - (1 197)
eliminations
(265) (3 203) (25 805)
Depreciation and
amortisation
Brands 464 452 746
Supply chain support - 427 487
Adjustments and (78) - 24
eliminations
386 879 1 257
OVERVIEW
The directors of Skinwell present the reviewed interim results for the six
months ended 31 August 2010 ("interim period"). The group has managed to grow
its system-wide sales revenue by 9.3% to R53.0 million (2009: R48.5 million)
through its franchise and corporate store system in respect of the Placecol and
DNB brands for the six months ended 31 August 2010, despite the closure of
certain of its outlets referred to below.
Beauty care remains very important to South African consumers; however purse
strings remain tight as the country slowly emerges from the recession.
Consumers remain very cautious and price-sensitive and will continue to be
prudent in the years ahead. Consumers are continuously trading down and are
searching for promotional offerings. Innovation and new product launches also
continued to stimulate consumer interest in the market according to the
Euromonitor International report released in July 2010, Beauty and Personal Care
- South Africa.
During the interim period the group has rolled out a new Point of Sales system
to 76 of its corporate and franchised beauty outlets with the objective to
install it into the remainder of beauty outlets by the end of February 2011.
This has significantly enhanced and simplified monthly reporting and the
tracking of promotions held within the group. In conjunction with the new Point
of Sales system, the group rolled out an integrated Gift Card system which
resulted in overall cost savings for the group.
One new Placecol branded salon was opened in George in the Western Cape at
Garden Route Mall in July 2010. The group has now successfully converted four
of its existing beauty salons to the World of Beauty brand, which is a one-stop
innovative offering that incorporates all beauty services (skin, nails and hair
care). Another two salons have been identified which will convert into World of
Beauty salons by 28 February 2011.
Strategic considerations dictated the de-franchising and the closure of certain
outlets during the interim period which resulted in the group increasing its
number of corporate outlets to 19 outlets as at 31 August 2010. These outlets
are included under inventories as they are available for resale. Four
franchised outlets were closed at Bel Air, Cedar Square, Broad Acres and
Festival Mall and five corporate outlets were closed. Where leases have not yet
expired, mandates were entered into with the landlords to re-let these premises.
In order to improve the overall profitability of the franchise chain, the group
has launched highly successful treatments and retail slimming products, which
were beneficial to the group`s system-wide sales during the interim period. By
strengthening the training team, the group has trained more than 1 200
therapists since May 2010 in terms of general continuous training, new
treatments and the slimming products.
Marketing and advertising expenditure increased since May 2010 to create renewed
brand awareness, with the group hosting three extreme make-over events in
Centurion, Stellenbosch and Bloemfontein. Another major drive since May 2010
was to restore corporate stores to profitability. This is an ongoing process
and continued emphasis will be placed by the group on restoring the
profitability of all corporate stores.
Cash flow remained under pressure during the interim period as a result of store
closures and final retrenchments in May 2010, which necessitated funding through
shareholders` loans. An improvement in cash flow is envisaged during the latter
part of the financial year as a result of reduced stock purchases and the
festive season which normally results in an upturn in the beauty industry.
FINANCIAL RESULTS
Group revenue decreased by 42% to R26.6 million (2009: R45.9 million) during the
interim period, as a result of the disposal of the manufacturing concern, CW
Pharmaceuticals (Pty) Limited (2009 interim revenues R4.9 million), the disposal
of the Beauty Institute (2009 interim revenues R1.9 million) and only one store
being opened compared to 15 for the comparative period. Gross profit decreased
by 28% to R19.2 million (2009: R26.8 million) and gross profit margins increased
by 24% to 72% (2009: 58%), due to increased royalty revenue with no associated
cost of sales.
Operating expenses decreased by 32% to R20.5 million (2009: R30.3 million). The
cost savings are mainly as a result of the disposals mentioned above. Final
retrenchments were done during May 2010 with retrenchment costs of approximately
R783 000 incurred by the group during the interim period.
Corporate stores available for resale to the value of R6 million are included in
inventories. It will be a primary focus point of management to sell these
stores to franchisees in order to strengthen the cash flow of the group. The
group had no material capital commitments for the purchase of property, plant
and equipment as at 31 August 2010.
Trade and other receivables include a student loan book, which relate to the
disposal of the Beauty Institute in the prior financial year. Continued focus
will be placed on the collection of the student loans.
PROSPECTS
The group is conducting research into a new loyalty programme to be implemented
during the next couple of months. A core focus will continue to be to
vigorously training staff, providing post development training to all salons to
ensure standardisation and service excellence levels across the various brands.
Management will continue to implement cost savings for the group, where overall
efficiencies can be improved.
DIRECTORATE
Executive directors JM Swart, LJ Rudolph and SF Grobbelaar resigned from the
board of the company and E Colyn joined the group on 11 May 2010 as the Chief
Executive Officer. WP van der Merwe was appointed as a non-executive director
during the interim period.
As announced on SENS on 22 November 2010, a new Financial Director, Melinda
Jacobs (CA(SA)) has been appointed to the board with effect from 1 January 2011.
BASIS OF PREPARATION
The interim results have been prepared in accordance with 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 and are in accordance with International
Financial Reporting Standards.
POST BALANCE SHEET EVENTS
HBC Corporate Outsourcing Partnership ("HBC"), who formerly rendered certain
outsourced bookkeeping services to the group, instituted a claim against the
group in the amount of approximately R725 000 in respect of certain alleged
bookkeeping services for a period since November 2008.
The claim, which has been submitted in November 2010 through an application in
terms of Section 345 of the Companies Act is disputed and opposed by the group,
on, amongst others, the basis that the alleged services were rendered outside
the course and scope of HBC`s mandate.
The group and the current directors, in executing their fiduciary duties, are
also in the process of obtaining further information from the former directors
and other role players who dealt with HBC at the relevant time to enable the
group to properly consider its legal position, and to resolve the dispute as
soon as possible.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the going-concern basis as the
directors have every reason to believe that the company has adequate resources
in place to continue in operation for the foreseeable future.
AUDITORS` REVIEW
The auditors, SAB&T, have reviewed these interim results. A copy of their
unqualified review opinion is available for inspection at the company`s
registered office.
DIVIDEND POLICY
No dividend has been declared for the interim period.
APPRECIATION
The directors would like to thank our staff for their extended efforts and our
clients for their support during the period.
By order of the Board
30 November 2010
Theo Schoeman Esna Colyn
Non-executive Chairman Chief Executive Officer
CORPORATE INFORMATION
Non executive directors:
TJ Schoeman (Chairman); MM Patel (Chairman of the Audit Committee); GSJ van
Nieuwenhuizen; WP van der Merwe
Executive directors:
E Colyn (Chief Executive Officer)
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: (086) 604 1315
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Designated Adviser:
Grindrod Bank Limited
Date: 30/11/2010 13:43:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
