A franchise giant in the making

Esna Colyn is establishing Imbalie as a front-runner in the beauty industry.

This article was originally published in the latest edition of the Moneyweb Investor digi-mag. To view the original, and the rest of the publication, please click here

Growing up in South Africa’s capital, Pretoria, with a father in the military, Esna Colyn remembers her upbringing as loving but tough. The principles of never giving up, hard work and perseverance were drummed into her as a child.

Unbeknown to Colyn at the time was that this hard-line style of parenting was preparing her for an eventful life in the working world. At the time the world of entrepreneurship and deal-making was foreign to her.

She has come a long way since, having carved out an impressive career in investment banking and corporate finance, working for Hoek and Wiehahn (now PwC), private banking group ABN Amro and Investec Bank.

But the turning point in her career came when she joined a small corporate finance business which listed a number of companies on the JSE, including franchise conglomerate Taste Holdings.

In 2007, a skin-care company called Placecol Holdings (since renamed Imbalie Beauty) had ambitions to list on the local bourse and Colyn assisted in the process. Placecol had already built a track record in the beauty industry; initially under founder Elma Mckenzie and then under two investors who bought the 18-year old business from her and aggressively grew it.

The business was marred by the misallocation of funds and declining profits which saw management exit the business in 2009, just two years after its listing. “I asked my boss for a six-month sabbatical to help the company with its turnaround,” Colyn recalls.

“I naively believed that I could sort things out in six months. But it didn’t work like that. I realised that it was a completely different journey and there was much more that I had to do while I was there. We saw potential in Placecol from day one when we listed it.”

The six-month sabbatical turned into six years with Colyn moving from an advisor to CEO. Turning the company’s fortunes around has not been easy. Without knowing how the beauty industry or franchising works, she had to learn fast. “I went into the industry cold. But as a child I loved to collect brands and always had a keen eye for brands.”

A turnaround begins

Tough steps had to be taken. These included shutting underperforming stores, shifting the business from corporate-owned stores to franchised ones, paying store leases that were in arrears and withdrawing its brands from Edgars to limit competition for its franchisees.

Arguably the biggest challenge Colyn inherited from previous management was the company’s ten-year-long battle with the South African Revenue Service (Sars) over unpaid taxes due to a syndicate that uplifted cheques between Absa and Sars. A settlement was finally reached last November.

It may be lovely on the outside, but the beauty game is as hard as nails on the inside, with Imbalie and its competitor Sorbet as well as thousands of independent skin-care operators vying for the same pool of consumers.

Colyn is more than up to the challenge. She says the trick is to be in tune with customers. “In December, I would work at a salon to stay in touch with the practicality of things. I have a good relationship with our franchisees. It doesn’t help opening beautiful salons if you don’t support them.”

Over the last two years Imbalie has spruced up about 90 stores, while rolling out more stores. The group now has 155 franchised salons and 24 corporate stores.

The company also recently acquired Prana Products, an importer of skin-care and hair products, and makeup. This followed the acquisition of Perfect 10 Nail & Body Studio in 2012 and saw Prana MD, Debbie Wolfendale join the group as executive director of marketing and sales.

Imbalie’s investment initiatives have not yet yielded benefits to its balance sheet. For the six months to August, Imbalie’s revenue decreased by 2.4% to R48 million and gross profit decreased by 7.3% to R 26.4 million. Margins declined by 2.9% to 55%.

Colyn plans to open and revamp at least ten stores per brand in the next financial year. Should it realise its store roll-out targets, this may see profits rise on the back of franchise royalties and own-brand distribution.  

She is upbeat about future prospects. “The business is now stable and it is becoming easier to convince the market about the investment case and prospects,” she says. New initiatives include exporting its skin-care products globally, piggybacking on its manufacturing network and partners in Iceland, Malaysia and the US.

In addition Imbalie is planning to grow its exposure to the male grooming space within its existing stores. Another potential profit kicker is the launch of its training academy in March which offers modular courses in beauty, wellness and fitness, business, image consulting and life coaching.

The wellness and fitness sector is on Colyn’s radar screen. The company recently tried to acquire fitness franchise Curves Africa for R20 million but pulled out of the deal because the parties could not agree on an acquisition price. “We are still hopeful that the Curves deal will be done in the future,” she says.

It has taken a while for the market to warm up to the small-cap company if its illiquid stock is anything to go by. The stock, which is largely held by management, has traded in a narrow range of 15 cents to 18 cents in the past six months.

Beyond the numbers and turnaround strategies, Colyn regards herself as a social entrepreneur. “The ultimate goal is to leave a legacy. We want to make our company successful and uplift the many women who buy into our franchise group.”

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