Infinity Eng Regulatory News (INFT)

20 Mar 2006 07:02

Global Brands S.A.20 March 2006 GLOBAL BRANDS S.A. ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2005 Chairman's Statement 2005 was a year of change for Global Brands S.A. ("Global Brands" or the"Company"). On 29 September 2005 the Company raised £3,500,000 via aninstitutional placing to finance its expansion plans and was admitted to tradingon AIM. Global Brands is the exclusive master franchisee of Domino's Pizza inSwitzerland, Luxembourg and Liechtenstein. Domino's Pizza Inc. ("Domino's") wasfounded in the United States of America in 1960 and is the world's leading pizzadelivery brand with over 8,000 stores in more than 50 countries. The Company entered 2005 with six Company operated Domino's Pizza stores: threestores located in Geneva, two in Zurich and one in Lausanne. During the secondhalf of 2005 the company initiated its expansion plan and opened threeadditional Company operated stores in Neuchatel, Winterthur and Luzern. By the end of 2005 the Company, with its nine Company operated stores, was theonly pizza delivery chain with a national presence in Switzerland and the onlyinternational pizza delivery brand in Switzerland. All three new stores were built to the highest standards and equipped with stateof the art technology to ensure that customers receive high quality products andservice. PULSE(TM), Domino's newest point of sale system, has been installed inall new stores, in order to improve ordering efficiency and increase sales.Moreover, during 2005, three of the existing stores were upgraded with PULSE(TM) The Company's manufacturing and distribution center (the "Commissary"), islocated in Lausanne and the Company's head office is located in Zurich. During 2005 the Company continued to offer the best standard of service tocustomers with approximately 95% receiving their orders in less than 30 minutes.The Company has continued to be innovative and unique, with the introduction,during 2005, of the Double Decadence pizza (double layer crust filled withPhiladelphia(R) cheese), Chicken Supreme (chicken breasts), Caesar Salad and newdesserts. At the beginning of 2005 the online ordering system was officially launched andonline orders accounted for 4.85% of the total orders of the year. The onlineordering platform will be further upgraded during 2006, in order to improve theshopping experience of the customers and to enable the Company to reachcustomers with more targeted marketing. Total revenue of the Company has risen by 7.4% to CHF7.9m in 2005. Same storessales (sales generated by those stores that have been operational for more thana year) has increased by 2.85% to CHF7.55m. The Company increased its gross profit by 7.2% to CHF6.23m (2004: CHF5.81m).Profit from operations before depreciation was CHF321,000. The 2005 figuresinclude recurring costs attributable to a publicly traded company andoperational costs of the three new stores. The exclusions of the above costsresults in an increase in profit from operations before depreciation of 6.7% toCHF582,000 (2004: CHF545,000). Profit on ordinary activities increased by 8.5% to CHF77,000 (2004: CHF71,000,after excluding the waiver of shareholders' loan interest which amounted toCHF726,000). According to IFRS accounting standards, store pre-opening costs should betreated as an expense and therefore presented as "charges in relation with theextension of the business". Pre-opening costs of the three newly opened storesamounted to CHF209,000. The inclusion of these costs means a loss of CHF131,000in 2005. The profit for the year excluding these costs is CHF77,000,representing an increase of 10% on the profit for 2004 which was CHF71,000excluding the waiver of shareholders' loan interest and deferred tax. 2006 will be an important year for the Company. The Directors believe that theCompany is well placed to take advantage of future opportunities in the homedelivery sector. The Directors intend to continue the opening and development ofnew stores to increase the Company's presence in Switzerland. Further, duringthis year the Directors plan to enlarge the Commissary's production capacity andto relocate it to central Switzerland. The Board continues to review a number of new business development opportunitiesfor the Company, including acquiring the franchise(s) for additionalinternational fast food brands in the territory. Current trading and outlook Same stores (six stores) have started 2006 strong with sales up 6.8% during thefirst nine weeks of 2006 over the same period of 2005. Online ordering increasedby 22.6% and now accounts for 5.95% of the total orders. The three new stores opened during the second half of 2005 are not performing as well as expected (approximately CHF 30,000 below budget on a monthly averageper store). Should this continue, the results for the current financial year will be considerably below expectations. All new stores were opened in "virgin"cities where Domino's did not have a prior presence. The Board believes this has had a significant influence on the initial performance of these stores and it underlines the need to invest in creating brand awareness. To assist the Company develop brand awareness, Global Brands has recentlycontracted HBH, a Swiss marketing and public relations agency, to build acoherent and clear marketing and public relations strategy. The Board will continue to closely monitor the development of the new stores andaccordingly decide whether to shift the focus of future new store openings tocities where Domino's already has a presence (namely Geneva, Zurich andLausanne) and amend the opening schedule.The Board would like to welcome Mr. Itamar Sadeh arriving from the UnitedKingdom, who joins our management team as Operations Manager. Itamar has workedwithin the Domino's family for the last 11 years and as such brings a range ofskills and experience to your Company. I would like to thank the management team and staff for their contribution anddedication to the development of the Company and to thank shareholders for theirsupport. I look forward to reporting on Global Brands' progress over the coming year. Yossi MoldawskyExecutive Chairman For further information, please contact: Global Brands Dov Lachovitz Yossi Moldawsky T: 00 972 3 575 4092 T: 00 972 5 444 50050 BALANCE SHEETAS AT 31 DECEMBER 2005(expressed in Swiss Francs) 2005 2004ASSETS Notes CHF CHF Non-current assetsIntangible fixed assets 11 212,441 244,920Property, plant and equipment 12 2,188,834 1,180,829Financial assets 13 90,802 92,519Deferred tax asset 14 148,302 148,302 ------------ ------------Total non-current assets 2,640,379 1,666,570 ------------ ------------Current assetsStocks 15 155,987 142,243Trade and other receivables 16 257,276 62,421Cash at bank and in hand 6,229,456 223,711 ------------ ------------Total current assets 6,642,719 428,375 ------------ ------------ Total assets 9,283,098 2,094,945 ============ ============ EQUITY AND LIABILITIES Capital and reservesCalled up share capital 17 10,128,006 13,250Share premium 17 1,959,535 ---Accumulated losses (4,611,358) (4,642,860) ------------ ------------Equity shareholders funds (deficit) 7,476,183 (4,629,610) ------------ ------------ Non-current liabilitiesShareholders' loans 18 --- 4,909,313Obligations under finance leases 18 110,956 109,833 ------------ ------------Total non-current liabilities 110,956 5,019,146 ------------ ------------ Current liabilitiesDue to banks 593 ---Trade and other payables 19 1,614,030 1,620,598Obligations under finance leases 18 81,336 84,811 ------------ ------------Total current liabilities 1,695,959 1,705,409 ------------ ------------ Total equity and liabilities 9,283,098 2,094,945 ============ ============ The financial statements were approved for issue by the Board of Directors on 17March 2006.The accounting policies and notes form an integral part of these financialstatements. STATEMENT OF INCOMEFOR THE YEAR ENDED 31 DECEMBER 2005(expressed in Swiss Francs) 2005 2004 Notes CHF CHFRevenue 4 7,851,083 7,308,153Cost of sales (1,621,500) (1,496,462) ------------ ------------Gross profit 6,229,583 5,811,691Staff costs 9 (3,805,481) (3,494,286)Administrative expenses 6 (2,102,630) (1,772,045) ------------ ------------Profit / (Loss) from operations beforedepreciation 321,472 545,360Depreciation (397,231) (444,182) ------------ ------------Profit / (Loss) from operations beforefinancial result (75,759) 101,178Interest and financial income 7 185,310 726,187Finance costs 8 (32,344) (30,176) ------------ ------------Profit / (Loss) on ordinary activities 77,207 797,189Charges in relation with the extension of thebusiness (209,050) --- ------------ ------------Profit / (Loss) on ordinary activities beforetaxation 4 (131,843) 797,189Deferred tax (charge) / credit 14 --- (203,449) ------------ ------------Profit/(Loss) for the financial year (131,843) 593,740 ============ ============ Basic earnings / (loss) per share 5 (0.03) 23.53Diluted earnings / (loss) per share (0.08) --- All activities relate to continuing activities. The financial statements were approved for issue by the Board of Directors on 17March 2006.The accounting policies and notes form an integral part of these financialstatements. STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2005(expressed in Swiss Francs) 2005 2004 Notes CHF CHFOPERATING ACTIVITIESNet cash flows from (applied to) operations 20 (102,746) 341,258 ----------- ---------- INVESTING ACTIVITIESPayments to acquire fixtures, equipment, motorvehicles and software (1,084,862) (17,823)Deposits (made) / repaid 1,717 4,223 ----------- ----------Net cash flows (outflows) for investing activities (1,083,145) (13,600) ----------- ---------- FINANCING ACTIVITIESPayments under finance lease obligations (117,594) (182,622)Proceeds from shareholders' loans --- 210,000Proceeds from capital increase 7,155,671 ---Interest (paid) / earned 152,967 (7,250) ----------- ----------Net cash flows (outflows) for financing activities 7,191,044 20,128 ----------- ---------- Increase / (decrease) in cash & cash equivalentsduring the year 6,005,153 347,786 =========== ========== Cash and cash equivalents:- net balance at beginning of the year 223,711 (124,075)- net balance at end of the year 6,228,864 223,711 ----------- ----------Increase / (decrease) in cash & cash equivalentsduring the year 6,005,153 347,786 =========== ========== Cash and cash equivalents at end of year arerepresented by: -------------------------------------------Cash at bank and in hand 6,229,456 223,711Due to banks (593) --- ----------- ----------Net balance at end of the year 6,228,864 223,711 =========== ========== The financial statements were approved for issue by the Board of Directors on 17March 2006. The accounting policies and notes form an integral part of these financialstatements. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Called up Share premium Accumulated losses Total share capital CHF CHF CHF CHF Balance at 1stJanuary 2004 13,250 --- (5,236,600) (5,223,350)Profit for theended --- --- 593,740 593,740year 2004 ----------- ----------- ---------- ---------Balance at 1stJanuary 2005 13,250 --- (4,642,860) (4,629,610) Cancellation ofshares (13,250) --- --- (13,250) Changes inrespect ofcapitalincreaseCapital raising 10,128,006 4,348,500 --- 14,476,506Charges inconnectionwith the --- (2,388,965) --- (2,388,965)capitalraising Prior yearsadjustments --- --- 163,345 163,345 Loss for theended --- --- (131,843) (131,843)year 2005 ----------- ----------- ---------- ---------Balance at 31December 2005 10,128,006 1,959,535 (4,611,358) 7,476,183 =========== =========== ========== ========= The financial statements were approved for issue by the Board of Directors on 17March 2006. The accounting policies and notes form an integral part of these financialstatements. NOTES TO THE FINANCIAL STATEMENTS 1 STATUTORY INFORMATIONGlobal Brands S.A. was incorporated under the laws of Luxembourg on July 6, 1999by a notary act prepared by Maitre Alex Weber, notary residing in Luxembourg.The act was published in the legal gazette, the Memorial C Ndegrees723 of29 September 1999. The Company is registered at the Registre de Commerce et desSocietes (R.C.S.) in Luxembourg under the number B 70.673. The registered officeis in Luxembourg. A branch has been opened in Switzerland through which itcarries on its principal trading activity. 2 ACTIVITIESThe Company has acquired the Domino's franchise licences, concessions and rightsfor Switzerland, Lichtenstein and Luxembourg. Its current activities consist ofthe promotion, manufacture and sale of Domino's Pizza in Switzerland. 3 BASIS OF PREPARATIONThe financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS). The Company prepared its first set of IFRS compliant financial statements forthe year ending 31 December 2004. The date of transition to IFRS for the Companywas therefore 1 January 2004. Appropriate reconciliations from Luxembourg statutory accounts to IFRS have beenprepared for purposes of this document and are included in these IFRS compliantfinancial statements. These financial statements prepared under IFRS were approved by the board ofdirectors and authorised for issue on 17 March 2006. They may only be changed bythe board of directors and are not subject to approval by shareholders. Going concern The financial statements have been prepared on the basis that the Company willcontinue as a going concern for the foreseeable future. In forming this opinion,the directors have prepared the Company's budgets for 2005 to 2009 andformulated its medium term plans. The company obtained additional adequatefinancial resources to finance the planned growth by setting up a privatecapital placement in 2005. Significant accounting policies The significant accounting policies used in the preparation of the financialstatements are summarised below.The financial statements have been prepared on the historical cost basis. Itshould be noted that accounting estimates and assumptions are used in thepreparation of the financial statements. Although these estimates are based onmanagement's best knowledge of current events and actions, actual results mayultimately differ from those estimates.The financial statements are stated in Swiss Francs ('CHF') which is thecurrency of the issued share capital of the company in Luxembourg and theCompany's functional currency. Revenue recognition Revenue is the total amount receivable by the Company for goods supplied andservices provided, excluding VAT and trade discounts. Revenue is recognised whengoods are delivered and title has passed. Interest income is accrued on a time basis by reference to the principaloutstanding and the interest rate applied. Property, plant and equipment Items of property, plant and equipment are stated at cost less accumulateddepreciation and impairment losses. Depreciation is calculated to write down thecost less estimated residual value of all property, plant and equipment by equalannual instalments over their expected useful lives. The expected useful livesgenerally applicable are: Furniture and office equipment: 3 to 4 years Fixtures, fittings and stores equipment: 6 to 10 years Motor vehicles: 3 to 7 years Fixtures, fittings and stores equipment were depreciated initially over the lifeof primary lease of stores of 5 years. In 2005, the directors have changed thisperiod to 10 years since the company has exercised its option under therespective leases to extend the lease contracts by a further 5 years. Leased assets Leases are classified as finance leases when the terms of the lease transfersubstantially the economic ownership of the asset to the lessee. Assets heldunder finance leases and hire purchase contracts are capitalised in the balancesheet and depreciated over their expected useful lives. They are capitalised attheir fair value at the date of acquisition, or if lower, at the present valueof the minimum lease payments. The interest element of leasing paymentsrepresenting a constant proportion of the capital balance outstanding is chargedto the profit and loss account over the period of the lease. All other leases are regarded as operating leases and the payments made underthem are charged to the profit and loss account on a straight line basis overthe lease term. Intangible assets Intangible assets acquired are stated at cost less accumulated amortisation andimpairment losses. Subsequent expenditure on capitalised intangible assets iscapitalised only when it increases the future economic benefits embodied in thespecific asset to which it relates. All other expenditure is expensed asincurred.Amortisation is charged on a straight-line basis over the estimated usefuleconomic life and charged from the date the asset is available for use. Theuseful lives are estimated as follows:Licences: 10 to 15 yearsSoftware: 2 years The carrying values are reviewed at each balance sheet date to determine whetherthere is any indication of impairment. If any such indication exists, the assetsrecoverable amount is estimated. An impairment loss is recognised whenever thecarrying value of the asset or its cash-generating unit exceeds its recoverableamount. Impairment losses are charged to the income statement Financial assets Financial assets held by the Company represent bank deposits which are stated atfair values. Deferred taxation Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements. The principal temporarydifferences arise from depreciation of property, plant and equipment, tax lossescarried forward and on the difference between the fair values of the net assetsacquired and their tax base. Deferred tax is provided for using the tax ratesestimated to arise when the timing differences reverse and is accounted for tothe extent that it is probable that a liability or asset will crystallise.Unprovided deferred tax is disclosed as a contingent liability. Deferred taxassets are recognised to the extent that it is probable that future taxableprofits will be sufficient and available against which the tax losses can beutilised. Deferred tax assets are reviewed at each balance sheet date todetermine the expected timing of their realisation. Stocks Stocks are stated at the lower of cost and net realisable value, after makingallowance for obsolete and slow moving items. Cost of raw materials, finishedgoods and consumables comprises the invoiced value of the goods. Debtors and receivables Debtors and receivables are stated at their nominal value, less provision forestimated irrecoverable amounts. Financial instruments The Company's financial instruments consist of long term bank deposits, cash,bank current accounts, short term bank deposits, trade receivables, otherreceivables, accrued income, trade payables, obligations under finance leasecontracts, loans ,other accounts payable and accrued liabilities. The fair valueof the financial instruments approximates their carrying values. Foreign currency Transactions in foreign currencies are translated at the exchange rate ruling atthe date of the transaction. Monetary assets and liabilities in foreigncurrencies are translated at the rates of exchange ruling at the balance sheetdate. Any gain or loss arising from a change in exchange rates subsequent to thedate of the transaction is included as an exchange gain or loss in the profitand loss account. Cash and cash equivalents Cash and cash equivalents include cash on hand, balances with banks and shortterm deposits with original maturities of three months or less. Bank guaranteedeposits are considered to be investing activities; bank borrowings areconsidered to be financing activities. Liquid funds assets are placed with recognised banks in Switzerland andLuxembourg and the balances represent their fair value. Short term bankoverdrafts are obtained to meet working capital needs. Costs of raising finance Costs of raising new capital are charged directly to the share premium account. Trade payables Trade payables are stated at their nominal amounts. Borrowings Loans and bank overdrafts are recorded at the proceeds amount. Interest andfinancial charges, including premiums payable on repayment, are accounted for onan accrual basis and are added to the amount of the debt.Interest expense is accrued on a time basis by reference to the principaloutstanding and the interest rate applied. Pension schemes The Company makes contributions to certain individuals' personal pension plans.Contributions are charged in the profit and loss account as they become payable.The company does not operate a defined pension contribution scheme or definedpension benefit scheme for its directors. 4 REVENUE AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATIONPrimary reporting format - business segment:Revenue, operations, profits and net assets are attributable entirely to itssingle business segment of selling pizzas. Secondary reporting format - geographical segment:Revenue and results are attributable primarily to Switzerland. There was norevenue in Luxembourg. The profit / (loss) on ordinary activities before taxation is stated after: 2005 2004 CHF CHFDepreciation:Property, plant and equipment owned 254,600 384,068Property, plant and equipment held under finance leases 110,152 27,390Amortisation of intangible fixed assets 32,479 32,724Operating lease rentals 276,475 276,386Auditors' remuneration:Audit services 43,200 8,925Non-audit services --- 3,375Foreign currency gains 154,479 4,893Pre-opening costs of three newly opened stores 209,050 --- Non-audit services relate to tax and corporate compliance services and duediligence services rendered. 5 EARNINGS PER SHAREThe calculation of basic earnings / (loss) per share is based on the followingdata: 2005 2004 CHF CHF Net profit / (loss) for the year (131,843) 593,740Number of issued shares of CHF 10 each --- 5,300Number of issued shares of CHF 2.10 each 4,822,860 ---Basic earnings / (loss) per share (EPS) (0.03) 23.53Diluted earnings / (loss) per share (0.08) --- The diluted EPS per share is calculated on the basis of the weighted averagenumber of shares in circulation.The basic EPS is determined on the basis of number of shares issued at the yearend (2004 is restated for the split in nominal value). 6 ADMINISTRATIVE EXPENSES 2005 2004 CHF CHF Administration and general expenses 1,349,283 1,169,743Marketing costs and royalties 753,347 602,302 -------- -------- 2,102,630 1,772,045 ======== ======== 7 INTEREST AND FINANCIAL INCOME 2005 2004 CHF CHF Bank interest income 30,831 542Waiver of interest on shareholders' loans --- 725,645Gain on foreign currencies 154,479 --- -------- -------- 185,310 726,187 ======== ======== Interest on shareholders' loans was waived in full in 2004, including interestcharged in the years 2000 to 2003. 8 FINANCE COSTS 2005 2004 CHF CHF Interest on bank loans and overdrafts 703 7,250Finance lease interest 10,675 10,788Other financial charges 20,966 12,138 -------- -------- 32,344 30,176 ======== ======== 9 STAFF COSTSStaff costs during the year include: 2005 2004 CHF CHF Wages and salaries 3,501,697 3,188,151Social security and state pension costs 271,119 295,221Other staff costs 32,665 10,913 -------- -------- 3,805,481 3,494,286 ======== ======== Social security costs are the Company's legal obligations to contribute to theSwiss State national health and pension funds. The average number of employees during the year was: Number Number Production and distribution 227 185Administration 5 4 -------- -------- 232 189 ======== ======== Remuneration in respect of directors was as follows: 2005 2004 CHF CHF Emoluments --- ---Remuneration of the members of the board of directors 123,150 ---Social Security and state pension contributions --- --- -------- -------- 123,150 --- ======== ======== There is no Company pension scheme in force for the directors. Remuneration to key members of management amounted to 249,000 235,000 10 INCOME TAX EXPENSEThere is no taxation charge because the Company has incurred losses in thefinancial years 1999 to 2003 and the tax losses are available to offset theprofits of the financial years 2005 and 2004. 2005 2004 CHF CHF Result for the year before tax (131,843) 797,189Swiss tax losses available (593,207) (1,407,005)Tax rate 25% 25%Expected tax expense --- --- The Company is fully taxable in Luxembourg and Switzerland on profits realisedfrom its operations. There were no profits attributable to Luxembourg during theabove years. The effective tax rates on profits are: 2005 2004 CHF CHF Luxembourg 30.38% 30.38%Switzerland 25.00% 25.00% 11 INTANGIBLE FIXED ASSETS Software Licences TotalYear 2004 CHF CHF CHFGross carrying amount at 01/01/2004 42,244 353,901 396,145Additions at cost 16,243 --- 16,243 ---------- ------- --------Gross carrying amount at 31/12/2004 58,487 353,901 412,388Accumulated amortisation brought forward (42,243) (92,501) (134,744)Amortisation charge for the year (8,244) (24,480) (32,724) ---------- ------- --------Accumulated amortisation at 31/12/2004 (50,487) (116,981) (167,468) ---------- ------- --------Net book value at 31/12/2004 8,000 236,920 244,920 ========== ======= ======== Year 2005Gross carrying amount at 01/01/2005 58,487 353,901 412,388Additions at cost --- --- --- ---------- ------- --------Gross carrying amount at 31/12/2005 58,487 353,901 412,388Accumulated amortisation brought forward (50,487) (116,981) (167,468)Amortisation charge for the year (7,999) (24,480) (32,479) ---------- ------- --------Accumulated amortisation at 31/12/2005 (58,486) (141,461) (199,947) ---------- ------- --------Net book value at 31/12/2005 1 212,440 212,441 ========== ======= ======== Licences include an initial payment of CHF 328,901 to acquire "Dominos pizza"operating franchise licence for a period of 15 years in Luxembourg,Liechtenstein and Switzerland. At 31st December 2005, the licence has aremaining life of 9 years. 12 Property, plant and equipment Fixtures, fittings Office equipment, Motor Total & store equipment & furniture vehiclesYear 2004 CHF CHF CHF CHFGross carryingamount 1,754,201 163,520 393,959 2,311,680at 01/01/2004Additions at cost 9,167 --- 160,674 169,841 -------- --------- --------- ---------Gross carryingamount 1,763,368 163,520 554,633 2,481,521at 31/12/2004Accumulateddepreciationbrought (641,049) (78,992) (169,193) (889,234)forwardDepreciationcharge (346,578) (40,828) (24,052) (411,458)for the year 2004 -------- --------- --------- ---------Accumulateddepreciation at31/12/2004 (987,627) (119,820) (193,245) (1,300,692) -------- --------- --------- ---------Net book value at31/12/2004 775,741 43,700 361,388 1,180,829 ======== ========= ========= ========= Year 2005Gross carryingamount 1,763,368 163,520 554,633 2,481,521at 01/01/2005Additions at cost 865,066 125,257 209,781 1,200,104Disposals/prioryears (16,205) --- (118,782) (134,987)restatement -------- --------- --------- ---------Gross carryingamount 2,612,229 288,777 645,632 3,546,638at 31/12/2005Accumulateddepreciationbrought (987,627) (119,820) (193,245) (1,300,692)forwardDepreciationcharge (222,202) (46,567) (95,983) (364,752)for the year 2005Write-back ofdepreciation 341,144 --- --- 341,144Prior yearsrestatement --- --- (33,504) (33,504) -------- --------- --------- ---------Accumulateddepreciation at31/12/2005 (868,685) (166,387) (322,732) (1,357,804) -------- --------- --------- ---------Net book value at31/12/2005 1,743,544 122,390 322,900 2,188,834 ======== ========= ========= ========= Fixtures, fittings & store equipment include assets under construction for anamount of CHF 109,534 (2004: ---).Fixtures, fittings and stores equipment were depreciated initially over the lifeof primary lease of stores of 5 years. In 2005, the directors have changed thisperiod to 10 years since the company has exercised its option under therespective leases to extend the lease contracts by a further 5 years.Changes in the lease period of stores has resulted in changes to accountingestimates of depreciation of fixtures and fittings, resulting in a prior yearadjustment of CHF 341,144 which is taken to retained earnings. Other prior yearrestatements relating to lease agreements taken to retained earnings amount toCHF 177,799. The net carrying amount of assets held under finance leases amounted to 2005 2004 CHF CHF Equipment 128,038 158,933Motor vehicles 209,600 205,538 --------- -------- Total 337,638 366,471 ========= ======== 13 FINANCIAL ASSETS 2005 2004 CHF CHF Bank guarantee deposits 90,802 92,519 ========= ======== Deposits are made with the Company's bankers as guarantees for lease ofpremises, stores and vehicles and are stated at fair values. 14 DEFERRED TAX ASSETDeferred taxation provided for in the financial statements is set out below. 2005 2004 CHF CHF Opening balance 148,302 351,751Tax (charge) credit for the year --- (203,449) --------- --------Balance at year end 148,302 148,302 ========= ======== The Company has tax losses available to reduce taxable profits in futureperiods. Having regard to the forecast of operations and profits over the years2006-2009, the directors consider that the potential tax savings in Switzerlandshould be recorded in these financial statements as a deferred tax asset. Tax losses available to set off against future profitsamount to 2005 2004 CHF CHF Luxembourg tax losses 172,180 269,064 ========= ======== Swiss tax losses available 593,207 593,207Deferred tax asset thereon at tax rate of 25% 148,302 148,302 As a matter of prudence, the directors have taken into account for 2005 only theSwiss tax losses from prior years which they consider as immediately available. Tax losses in respect of Luxembourg have not been used to determine deferred taxasset since it is uncertain when these losses may be utilised. 15 STOCKS 2005 2004 CHF CHF Raw materials - foods and beverages 101,544 87,815Other consumables 54,443 54,428 --------- -------- 155,987 142,243 ========= ======== All stocks are stated at cost which approximates their fair values. There are nowrite-downs in value. 16 TRADE AND OTHER RECEIVABLES 2005 2004 CHF CHF Trade debtors 2,768 1,546Other debtors, prepayments and accrued income 254,508 60,875 --------- -------- 257,276 62,421 ========= ======== 17 CAPITAL AND RESERVESShare capital 2005 2004 CHF CHF Allotted and issued 10,128,006 53,000Unpaid (75%) --- (39,750) --------- -------- Share capital 10,128,006 13,250 ========= ======== The Company has one class of share which carries no right to income other thandistributions of dividends. The subscribed capital is represented by 4,822,860 shares of CHF 2.10 each. Theauthorized capital is set at CHF 21,000,000 divided in 10,000,000 shares havinga par value of CHF 2.10 each. On May 4th 2005, the 53,000 existing shares of a par value of CHF 10 werecancelled and replaced by the issue of 25,238 shares of a par value of CHF 2.10.A capital increase of CHF 5,209,307 was decided by the issue of 2,480,622 sharesof a par value of CHF 2.10 as change for conversion of shareholders' loans.On August 8th 2005, the Company increased its capital by CHF 1,338,750 by theissue of 425,000 shares of a par value of CHF 2.10 and the payment of a sharepremium of CHF 446,250.On October 21st 2005, a capital increase of CHF 7,875,450 was decided by theissue of 1,892,000 shares of a par value of CHF 2.10 and the payment of a sharepremium of CHF 3,902,250 to set the capital at CHF 10,128,006 divided in4,822,860 shares having a par value of CHF 2.10 each. On August 1st 2005, the general meeting of shareholders of the company approveda stock option plan for the benefit of the employees and directors. The companygrants to the beneficiary a number of options to subscribe for and pay in up tothe maximum number of newly issued shares of the company, having a par value ofCHF 2.10 each, at the exchange ratio of one option for each share. Options for428,651 shares were issued and none of those options was exercised during theyear. Share premium 2005 2004 CHF CHF Share premium on capital increase 4,348,500 ---Capital increase costs (2,388,965) --- --------- -------- Share premium 1,959,535 --- ========= ======== Legal reserve The Company is obliged to make a transfer of at least 5% of its annual netprofits to a legal reserve. Retained losses are deducted in determining theamount of the annual transfer. This transfer ceases when the legal reserve isequal to 10% of the subscribed share capital, but recommences if it falls belowthis level. The legal reserve is not available for distribution, except ondissolution. A legal reserve is not required since the Company has accumulated losses. 18 NON-CURRENT LIABILITIES 2005 2004 CHF CHF Shareholders' loans --- 4,909,313Obligations under finance leases and hire purchasecontracts 110,956 109,833 ---------- -------- 110,956 5,019,146 ========== ======== During 2004, interest charged in previous years was waived in full by theshareholders. The financial effect of the waiver has been included in profit andloss for 2004.The shareholders' loans were repaid fully on May 4th, 2005 by the issue of2,480,622 shares of Global Brands S.A. of a par value of CHF 2.10. Obligations under finance leases in respect of equipment and vehicles are forperiods of two to five years and are recorded as liabilities in the balancesheet. The lease contracts bear interest at rates of between 5% and 5.7% and arerepayable in fixed monthly instalments of principle and interest over the periodof the lease. In the event that lease obligations are not fulfilled, the lessorhas a right to recover the asset. The leases to which these amounts relate expire as follows: 2005 2004 CHF CHF In one year or less 81,336 84,811Between one and five years 110,956 109,833In five years or more --- --- ---------- -------- 192,292 194,644 ========== ========Aggregate minimum lease payments due under the contractsinclusive of finance charges amount 192,292 194,644 The finance charges therein amount to 17,456 29,599 19 TRADE AND OTHER PAYABLES 2005 2004 CHF CHF Trade creditors 911,795 883,834Other taxes and social security 72,810 236,499Other creditors, accruals and deferred income 629,425 500,265 --------- -------- 1,614,030 1,620,598 ========= ======== Other taxes comprise payroll taxes and sales taxes. 20 NET CASH FLOWS FROM OPERATING ACTIVITIES 2005 2004 CHF CHF Profit / (Loss) on ordinary activities before taxation (131,843) 797,189Adjustments forDepreciation and amortisation 397,231 444,183Interest on shareholders loans --- (725,646)Restatement for financial result (152,967) 7,250 --------- --------Operating cash flows before movements in working capital 112,421 522,976 Decrease/(increase) in stocks (13,744) 6,830Decrease/(increase) in debtors (194,855) 56,771Increase/(decrease) in creditors (6,568) (245,319) --------- --------Net cash inflow (outflow) from operations (102,746) 341,258 ========= ======== 21 CAPITAL COMMITMENTSUnder a franchise agreement with Domino's Pizza International Inc. USA, theCompany has a commitment to pay US$ 10,000 on the opening of every new storefrom the ninth store onwards; in addition the company has to pay to Domino'sPizza International Inc., a royalty fee based on its sales, and is required toset aside a percentage of its sales revenue for advertising and marketing. 22 LEASING COMMITMENTSOperating leasesThe company has commitments under several short-term and long-term operatingleases in respect of its offices, parking and stores. The offices and storesleases are for periods of 5 years, renewable, and with cancellation noticeperiods of six months before the expiry of the contract. In the event ofcancellation before the expiry of the term of the lease, penalty cancellationcharges are payable. 2005 2004 CHF CHF Operating charge for the year 276,475 276,386 ========= ======== The future minimum payments under these leases expire as follows: 2005 2004 CHF CHF In one year or less 292,840 229,822Between one and five years 480,430 325,400In five years or more 5,840 9,260 --------- -------- 779,110 564,482 ========= ======== 23 CONTINGENT ASSETS/LIABILITIESThe Company has been sued by an employee for payment of CHF 75,000. The GenevaLabour Court has ordered the Company to pay CHF 25,000 and the Company will notappeal this decision. These charges had been accrued for in the accounts 2004and the amount awarded to the plaintiff has been paid in 2005. A former employee claimed CHF 105,000 from the company. The Directors cannotestimate the outcome. 24 FINANCIAL RISK MANAGEMENTThe Company's turnover is dependent on a single product, being the productionand sale of pizzas; sales are mainly carried out in cash and management hasimplemented controls to monitor the cash collections; exposure to credit risk islimited to the amount of trade receivables and other receivables from cardprocessing companies. The receivables are stated net of provisions for doubtfuldebts estimated by management based on collections and economic conditions. The Company is not dependent on key customers and has no significant riskassociated to any one customer. The directors consider that the carrying valuesof trade and other receivables approximate their fair value. Liquid funds assets are placed with regulated banks in Switzerland andLuxembourg and the balances represent their fair value. Short term bankoverdrafts are obtained to meet working capital needs. Interest is paid atmarket rates in force. 25 RELATED PARTIES AND CONTROLLING PARTY The Company is controlled by its directors and members of the Moldawsky familyand the Moldawsky group which has its registered office in Israel. -END- This information is provided by RNS The company news service from the London Stock Exchange