1 Mar 2007 07:00
GLOBAL BRANDS S.A. FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 CHAIRMAN'S STATEMENT
Global Brands S.A. ("Global Brands" or the "Company") is the exclusive master franchisee of Domino's Pizza in Switzerland, Luxembourg and Liechtenstein. Domino's Pizza Inc. ("Domino's") was founded in the United States of America in 1960 and is the world's leading pizza delivery brand with over 8,000 stores in more than 50 countries.
2006 was a difficult and challenging year for Global Brands. The Company entered the year with nine Company operated Domino's Pizza stores: three stores located in Geneva, two in Zurich, one in Lausanne, one in NeuchĢtel, one in Winterthur and one in Luzern. During the year the company opened two additional Company operated stores: one in Biel/Bienne and a second store in Lausanne (Renens).
By the end of 2006 the Company, with its eleven Company operated stores, remains the only pizza delivery chain with a national presence in Switzerland and the only international pizza delivery brand in Switzerland.
The Company's manufacturing and distribution centre (the "Commissary"), is located in Lausanne and the Company's head office is located in Zurich.
During 2006 the Company continued to improve its standard of service to customers with approximately 96% receiving their orders in less than 30 minutes (20% less lates vs. last year). The Company has continued to be innovative and unique, with the introduction, during 2006, of the `salami-passion' and `mediterranean' pizzas, cheesy bread and salad roquette.
During the second half of 2006 the new online ordering platform was launched and online orders accounted for 5.8% of the total orders, by value, for the year (an increase of 20% over last year). The number of online orders impressively increased by 77% over the previous year. We believe that a better shopping experience as well as targeted marketing were the driver for this increase.
Total revenue rose by 33% to CHF10.5m in 2006 (2005: CHF 7.85m, 7.4%). Same stores sales (sales generated by those stores that have been operational for more than a year) has increased by 10.2% to CHF8.7m (2005: CHF7.55m, 2.85%). During the month of December 2006 the Company's sales exceeded CHF 1,000,000 for the first time.
The Company increased its gross profit by 31.6% to CHF8.2m (2005: CHF6.23m, 7.2%).
Loss from operations before depreciation was CHF1,171,782 (2005: profit CHF321,472). The loss was mainly due to the under-performance of the new stores combined with heavy investment in marketing and PR. During the year the Company invested CHF1,188,151 in marketing, an increase of over 57% compared to last year, in order to generate sales in the short term as well as create brand awareness for the mid term.
Loss on ordinary activities was CHF1,607,188 (2005: profit CHF77,207).
According to IFRS accounting standards, store pre-opening costs are treated as an expense and therefore presented as "charges in relation with the extension of the business". Pre-opening costs of the three newly opened stores (including Luzern - opened during the last days of 2005) amounted to CHF291,330 (2005: CHF209,050). A deferred tax asset was created to recognise the future benefits of tax losses, it amounts to CHF584,698 for the year. The inclusion of these costs means a loss of CHF1,313,820 (2005: CHF131,843).
The Company's cash position remains strong, with net cash of over CHF4.3m as at the end of the period, with no loan facilities, enabling the Company to execute its development plan for Domino's Pizza in the territory.
During 2007 the Directors intend to continue the opening and development of new stores in selective locations to increase the Company's presence in Switzerland.
The Board continues to review new business development opportunities for the Company in the territory.
Current trading and outlook
Same stores (eight stores) continue to make further progress with sales up 6.1% during the first seven weeks of 2007 over the same period in 2006. Online ordering continues to increase; during the first seven weeks of 2007 online ordering increased by 140% over the same period last year and now accounts for 8.58% of the total orders and 11.31% of total turnover.
The Board has decided to cease operation of the Company's owned store in Luzern by the end of the first quarter. This is a result of substantially low sales of the store (50% below budget) and in order to avoid further losses.
The Board will continue to closely monitor the development of the remaining new stores and accordingly take the needed actions.
In line with the Board's strategic decision to focus future store openings in cities in which the Company is already active and enjoys brand recognition, the Company has recently signed a new lease agreement for a third location in Zurich and has applied for construction permits The Company plans to shift the equipment from the store in Luzern to the new store in Zurich. The Company is negotiating additional potential locations for further openings.
I extend the gratitude of the Board to all our shareholders and employees for your support.
I look forward to reporting on further progress during the current financial year.
Yossi MoldawskyChairman27 February 2007
These financial results have been audited. The full annual report will be posted to shareholders and will be available from Ruegg & Co Limited, 39 Cheval Place, London SW7 1EW (tel: 020 7584 3663 email: ruegg@ruegg.co.uk) for 1 month.
STATEMENT OF INCOME(Expressed in Swiss francs) 2006 2005 CHF CHF Revenue from sales 10,499,573 7,851,083 Cost of sales (2,300,387) (1,621,500) Gross profit 8,199,186 6,229,583 Staff costs (5,545,081) (3,805,481) Administrative expenses (3,825,887) (2,102,630)
(Loss) / profit from operations before depreciation (1,171,782) 321,472 & amortisation
Depreciation and amortisation (557,373) (397,231) (Loss) / Profit from operations before financial (1,729,155) (75,759)result Interest and financial income 157,317 185,310 Finance costs (35,350) (32,344) (Loss) / Profit on ordinary activities (1,607,188) 77,207 Charges in relation with extension of the (291,330) (209,050)business Deferred tax credit 584,698 - Loss for the year (1,313,820) (131,843) Basic earnings / (loss) per share (0.272) (0.08) BALANCE SHEETAS AT 31 DECEMBER 2006(Expressed in Swiss francs) 2006 2005 CHF CHF ASSETS Non-current assets Intangible assets 210,685 212,441 Property, plant and equipment 2,903,158 2,188,834 Financial assets 94,315 90,802 Deferred tax asset 733,000 148,302 Total non-current assets 3,941,158 2,640,379 Current assets Stocks 214,974 155,987 Trade and other receivables 124,855 257,276 Cash at banks and in hand 4,358,814 6,229,456 Total current assets 4,698,643 6,642,719 Total assets 8,639,801 9,283,098 EQUITY AND LIABILITIES Capital and reserves Called up share capital 10,128,006 10,128,006 Share premium 1,959,535 1,959,535 Accumulated losses (5,925,178) (4,611,358) Equity shareholders' funds (deficit) 6,162,363 7,476,183 Non-current liabilities Obligations under finance leases 61,037 110,956 Total non-current liabilities 61,037 110,956 Current liabilities Due to banks 0 593 Trade and other payables 2,363,630 1,614,030 Obligations under finance leases 52,771 81,336 Total current liabilities 2,416,401 1,695,959 Total equity and liabilities 8,639,801 9,283,098 STATEMENT OF CASH FLOWS(Expressed in Swiss francs) 2006 2005 CHF CHF OPERATING ACTIVITIES Net cash flows applied to operations (630,117) (102,746) INVESTING ACTIVITIES Payments to acquire fixtures, equipment (1,269,941) (1,084,862)motor vehicles and software Deposits (made) repaid (3,513) 1,716 Net cash flows (outflows) from investing (1,273,454) (1,083,146)activities FINANCING ACTIVITIES Payments under finance lease obligations (78,484) (117,594) Interest (paid ) received 112,006 152,967 Proceeds from capital increase - 7,155,671 Net cash flows ( outflows) from 33,522 7,191,044financing activities Increase ( decrease) in cash & cash (1,870,049) 6,005,152equivalents during the year Cash and cash equivalents: - net balance at beginning of the year 6,228,863 223,711 - net balance at end of the year 4,358,814 6,228,863 Increase ( decrease) in cash & cash (1,870,049) 6,005,152equivalents during the year Cash and cash equivalents at the end of the year are represented by : Cash at banks and in hand 4,358,814 6,229,456 Due to banks - (593) Net cash and cash equivalents at end of 4,358,814 6,228,863the year NOTES1 Statutory information Global Brands S.A. (the " Company") was incorporated under the laws of Luxembourg on July 6, 1999 by notary act prepared by Maitre Alex Weber, notary residing in Luxembourg. The act was published in the legal gazette, the Mƒ©morial C N‚° 723 of 29 September 1999. The Company is registered under the number B 70673 at the Register of Commerce and Societies in Luxembourg (Registre de Commerce et des Sociƒ©tƒ©s (R.C.S.) The registered office is in Luxembourg. A branch has been opened in Switzerland where it carries on its principal trading activity. 2 Activities Global Brands S.A. (the ‚« Company ‚») has acquired the Domino's franchise licences, concessions and rights for Switzerland, Lichtenstein and Luxembourg. Its current activities consist of the promotion, manufacture and sale of Domino's Pizza. 3 Directors' responsibility The annual report and financial statements drawn up under IFRS were approved by the Board of Directors on 27 February 2007. They may be changed only by the Board of Directors and are not subject to approval by shareholders. The statutory annual accounts for the year ended 31 December 2006 drawn up in accordance with Luxembourg law will be submitted to shareholders for approval of shareholders at the annual meeting on 1st June 2007. Statutory annual accounts for the year ended 31 December 2005 have been approved by shareholders and have been filed at the R.C.S. in Luxembourg. 4 Earnings (loss) per share (EPS) The calculation of the basic earnings per share is determined on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The elements used in the calculation are: 2006 2005 Number of issued shares of CHF 2.10 each 4,822,860 4,822,860 The weighted average number of shares in 4,822,860 1,629,884 circulation during the year was : CHF CHF Loss for the year (1,313,820) (131,843) Basic earnings (loss) per share (0.27) (0.08) The directors consider that there is no dilutive effect of share options issued because the market price of the shares is substantially lower than the exercise price so that it is most improbable that the options would be exercised at their exercise price of ‚£ 1.85/‚£1.15
For further information, please contact:
Global Brands Telephone Dov Lachovitz 00 41 79 7744 627 Ruegg & Co Limited 00 44 (0)20 7584 3663 Brett Miller
Threadneedle Communications 00 44 (0)20 7936 9605 Graham Herring/Alex White
GLOBAL BRANDS S.A.