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Johannesburg - JSE-listed skin care and beauty products manufacturer and retailer Placecol increased its profit ten-fold in the last six months. The company reported its maiden interim results to the JSE on Tuesday.
A R494 000 profit in the six months ended August 2006 has grown to R5.1m in the half-year ended August 2007. That came on the back of a 108% revenue growth, which saw a 70% increase in net asset value (NAV) per share to 42.9 cents.
Placecol made a net profit of R2.5m in the year ended February 2007. It forecasts net profit of R12.3m and R16.6m for the years ending February 2008 and 2009 respectively.
The company said its directors remain confident that it will achieve its profit forecast as set out in its listing prospectus.
However, the rapid growth in profit was matched by a ten-fold increase in the cost of sales to R22.5m from R2m in the previous year.
During the reporting period, Placecol focused on the aggressive roll out of franchises to enhance the overall profit margins of the group. This proved to be "very successful" with 12 new franchises being established.
New stores to increase
"At the current rate of opening new stores, it is expected that the number of franchises will exceed 100 by year end of February 2008," the company said.
However, the store roll out has not exhausted cash resources for more investment activities, with cash at hand increasing to R18m from R7m. This is despite the fact that Placecol had laid out cash investment activities amounting to R10m in the reporting period, against R4m previously.
The R18m cash resource can be used to achieve its ambition of supplying "certain advanced equipment focusing on body treatments" to the Dream Nails franchised beauty outlets.
Placecol said it would also place a strategic focus on increasing the retail of beauty products at Dream Nails franchised beauty outlets. The products would be manufactured within the Placecol group, by CW Pharmaceuticals.
Largest in the industry
The group listed on the JSE's AltX in August 2007, after being formed as CW Pharmaceuticals by CE Wessel de Wet and some of his co-directors in 1974. To expand the business, nail care products retail company Dream Nails was acquired in July 2007 for R12.2m in a combination of cash and shares.
Placecol Cosmetics was bought for R14.7m in 1997 and bundled into the group in December 2006.
Through the acquisition of Dream Nails, it has become the largest franchisor in the health and beauty industry in South Africa, with 44 franchised outlets making up the bulk of its 85-store network that is located mostly in the Edgars group stores.
Most of the acquisitions were effected with share issues, which resulted in the 90 million issued shares at August 2006 increasing to the current 132 million.
- Fin24