Cooks Global Foods Limited reported progress in consolidating its business, most of which were acquired less than a year earlier in October 2013, and growing its global footprint and store numbers.
In the six months since its March 2014 year end, the company has expanded into two new territories, and grown its worldwide store numbers to 79 at the end of September 2014.
The store opening program has continued at an accelerated pace and at the report date (12th December) there were 85 stores operating globally.
The previously published target of stores for the end of March of 86 will be exceeded with this number now projected to be well in excess of 90. Expansion in both China and the Middle East has been driving the acceleration of the plan.
The company acquired the Esquires IP rights in Canada in April 2014 and now owns the international Esquires brand rights globally excluding Australia and New Zealand.
More recently the company has launched a major capital raising campaign, involving a series of graduated steps aimed to complete before the middle of 2015. These funds have been targeted for major capital projects, including potential strategic and growth focussed acquisitions.
The company recorded an unaudited operating net loss of $1.2 million for the period ended 30 September 2014, compared with a pre-transformation operating net loss of $0.8 million for the period ended 30 September 2013.
This result is in line with company forecasts which anticipate reducing losses and moving to profitability as critical mass is achieved through both natural and acquired growth.
As expected, significant costs were incurred during the period relating to developing the businesses global presence in new markets, acquiring the China business and continuing to build the necessary infrastructure and operational base necessary to support a growing platform of coffee houses across the globe.
The financial statements for the half year are unaudited. However, as part of the process of building the necessary infrastructure to support the business, the company recently announced the appointment of a top tier audit firm, PwC, to become their external auditor for the financial year ending 31 March 2015.
Ongoing Company transformation
Cooks acquired the Esquires Canadian intellectual property rights in April this year from the original Esquires franchisor founded in 1993. The arrangement means that Cooks licenses back to Esquires Canada the right to use the IP for nine existing Esquires Coffee House stores in British Columbia and also for the purpose of an existing provincial licensee for Alberta.
During the period the company also entered into a conditional agreement, subject to Chinese government approval, to acquire the China Esquires master franchise business. Expectation is that the formal government approval process will be completed before the end of 2014. The company anticipates making an announcement on this imminently.
The potential acquisition of the China business presents enormous growth and revenue opportunities for the company.
Financial and operational overview for the period ended 30 Sept 2014 (unaudited)
$’000 30 Sept 2013*
(unaudited)
$’000
Operating Income 4,336 –
Operating Net Profit / (Loss) (1,178) (831)
Cash flows from operating activities (960) (155)
Basic earnings per share (cents) (0.44) (2.55)
* Note: Comparative figures are not meaningful as the operating activities of Cooks Global Foods changed completely, effective 1 October 2013.
Total operating revenue for the period ended 30 September 2014 was $4.3 million, derived primarily from Esquires Coffee House revenues of $3.75 million with revenues from the Supply Division, which includes the Scarborough Fair and Progressive Processors businesses, of $0.55 million.
Cash outflows from operating activities were $1 million reflecting costs associated with growing the global footprint for the Esquires franchise business, including those relating to the acquisition of the China Esquires operation.
Cooks has continued to consolidate the various companies acquired in October 2013 and the Design Environments business acquired in February 2014. Support functions and operational systems continue to be developed and strengthened.
The focus also remains on appointing and developing key personnel as the business expands and grows.
Store overview
Number of cafes by country 30 Sept 2014 30 Sept 2013 Opened/(closed)
UK 24 29 (5)
Ireland 5 6 (1)
China 18 8 10
Saudi Arabia 9 8 1
Bahrain 3 1 2
UAE 3 2 1
Kuwait 3 1 2
Canada 14 14 –
TOTAL 79 69 10
The figures at 30 September 2013 are for comparative purposes only as CGF group did not own the global franchise until October 2013 and the Canada franchise portion until April 2014.
As at 30 September 2014, Esquires had 79 Coffee Houses worldwide. The stores are based in the UK, Ireland, Middle East and China. Store numbers continue to grow rapidly with a further 6 stores added to this number since – three in China, two in Kuwait and one in Bahrain. A further three stores are anticipated to open in China and the Middle East before the end of December 2014.
Sales across the store network are showing good growth on prior year comparatives. Irish store turnover continues to lead the way with some of the best performing stores in the franchise. China figures are strong and the Middle East also continues to improve on past performance.
Results from the UK business continue to be mixed, but the business now has a strong team in place and a number of opportunities in train. The business recently sold its Durham store to a new Franchisee after a major store refurbishment incorporating the new branding and design templates to be progressively rolled out across the network in the UK and internationally.
Trading results since the store reopened in October have been very encouraging with turnover up more than 20%.
During the period the company completed the signing of Master Franchise Agreements in Northern Cyprus and in Indonesia. The agreement in Indonesia will see a minimum of 40 stores rolled out in the country over the next 10 years. Work is currently underway to open the first stores in both countries before the end of the current financial year.
Capital Raising
Cooks has continued to raise equity from qualified investors through the period. However, during that time a more strategic approach to capital raising has crystallised with the intention to steadily execute the various stages of that plan over the coming months through to mid-2015. The first stage of this plan has commenced via the Share Purchase Plan (SPP) which gives all shareholders the opportunity to partake in the company’s growth.
The SPP is due to complete prior to Christmas.
Governance
CGF’s directors as at 30 September 2014 were Norah Barlow, Lewis Deeks, Stuart Deeks Mike Hutcheson, Keith Jackson, Andrew Kerslake, and Graeme Lee.
Outlook
“With the foundations for Cooks firmly in place, the business is focussed on rapidly and aggressively expanding its network through both natural and acquired growth to achieve critical mass. These are very exciting times for Cooks that present enormous opportunities,” said Cooks Food Group Chairman, Keith Jackson.
“The full acquisition of the China Master Franchise that is expected to be finalised shortly will provide a further opportunity to build a strong business in the huge China market. Esquires has a strong management team in place based in Beijing and a number of excellent business partners in place, “Mr Jackson said.
