7 Sep 2007 07:00
GLOBAL BRANDS S.A. INTERIM REPORT FOR THE PERIOD ENDED 30 JUNE 2007 Chairman's Statement
Global Brands S.A. (the "Company"), the exclusive master franchisee of Domino's Pizza in Switzerland, Luxembourg and Lichtenstein, announces its interim results for the six month period ended 30 June 2007.
I am pleased to report that the first half of 2007 was a turnaround period forthe company. The growth in revenue, decrease in expenses as well as thebenefits of management's decision to discontinue unprofitable stores, resultedin a significant improvement in EBITDA. The actions taken by the management andefforts invested by the team members during the period have proved to befruitful. I believe that as progress continues, we will be well placed to moveto the next development stage.During the relevant period the Company continued to offer the best product andservice in the market to its customers and introduced the new "Dominator" pizza(a large extra thin crust base) which has proved very popular. Brand buildingactivity continued to be an important focus, with investments in marketingcampaigns both off-line and on-line.The Company entered 2007 with eleven Company operated stores and during theperiod closed down two stores, one in Luzern and one in Biel/Bienne. The Boardbelieves that the lack of brand awareness had a substantial effect on theunderperformance of these stores and plans to re-enter those cities at a laterstage of development. Most of the equipment of these stores will be used in thestores to be opened (see below - `Current trading and outlook').
Consequently, as of the end of the period, all of the Company stores are profitable.
Further, during the period the Company has acquired and renovated a mobilestore (a trailer pizzeria). The mobile store is targeted to take part in eventsaround the country, both as point of sale offering Domino's Pizza products, aswell as a brand awareness driver.
During the period under review the total revenues of the Company rose by 6.5% over the same period in 2006 to CHF 5.4 million.
During the period, same stores (stores that have been operational for more thana year) continued to grow with sales increasing by 2.5% over the same periodlast year. The increase was affected by the reduction of part of the deliveryarea of the first store in Lausanne (a same store) in favour of the secondstore opened in Lausanne (new store).
During the first half of 2007 online orders increased dramatically by 85% over the same period last year and accounted for 9.4% of the total orders of the period and 12% of the total revenues of the period.
The Company increased its gross profit by 4.7% over the same period last yearto CHF 4.2 million. The first half of 2006 operating loss (before depreciation,amortisation and extraordinary charges) of CHF 589,243 has been impressivelyreduced by 54% to CHF 272,937 for the period under review.
After taking into account financial income and deducting depreciation and extraordinary charges, the six months' loss to 30 June 2007 was CHF 552,714 (2006: CHF1,062,010).
During the period the loss per share (`EPS') has been halved from CHF 0.22 to CHF 0.115.
In addition, during the six month period the Company has decreased its working capital by CHF 558,235 compared with an increase of CHF 477,338 in the same period last year.
The Company's cash position remains strong with net cash of CHF 3.3 million as at end of the period with no loan facilities.
Current trading and outlook
We have made a promising start to the second half of the year.
Revenues are marginally up in the first two months over the same period lastyear; neutralizing the negative effect of the two closed stores, the revenuesare up more than 9%.
Our online ordering platform continues to be a fast growing channel to market with sales up by 48% over the same period last year.
Last month, a new store was opened in Zurich. The store, the third in the city,is located in the heart of the university district. Towards the beginning ofthe coming academic year in October, a marketing campaign will take placetargeting the university students and personnel.
During the last weeks, the mobile store was officially launched and participated in several events throughout Switzerland. The operation went smoothly and the response from customers, both in terms of sales and satisfaction, was excellent.
The Company is currently negotiating additional potential locations for further store openings.
The Company's team members will continue to work hard with the objective of maintaining the momentum during the second half of the year.
I would like to thank everyone in the Domino's team for their dedication and for their contribution to the development of the Company.
I look forward to reporting on Global Brands' progress over the remainder ofthe year.Yossi MoldawskyExecutive Chairman Unaudited Unaudited STATEMENT OF INCOME 6 months ended 6 months 12 months ended ended (Expressed in Swiss francs) 30 June 30 June 31 December 2007 2006 2006 Notes CHF CHF CHF Sales revenue 4 5,395,101 5,065,435 10,499,573 Cost of sales (1,183,293) (1,044,166) (2,300,387) Gross profit 4,211,808 4,021,269 8,199,186 Administrative, marketing and (4,484,745) (4,610,512) (9,370,968)staff costs Loss from operations before (272,937) (589,243) (1,171,782)
depreciation, amortisation and
extraordinary items Depreciation and amortisation (312,448) (287,495)
(557,373)
Extraordinary income (charges) 8 (33,142) (232,148)
(291,330)
Profit (loss) from operations (618,527) (1,108,886)
(2,020,485)
Interest and financial income 76,851 58,613
157,317
Interest and financial charges (11,038) (11,737) (35,350) Loss on ordinary activities (552,714) (1,062,010) (1,898,518) Deferred tax (charge) / credit - - 584,698 Loss for the period/year (552,714) (1,062,010) (1,313,820) Basic earnings / (loss) per 5 (0.115) (0.220) (0.272)share
The accompanying notes 1 to 10 are an integral part of this interim report. Unaudited Unaudited BALANCE SHEET as at 30 June 30 June 31
December
(Expressed in Swiss francs) 2007 2006 2006
Notes CHF CHF CHF ASSETS Non-current assets Intangible assets 196,653 200,200 210,685 Property, plant and equipment 2,881,210 2,464,088 2,903,158 Financial assets 99,115 93,802 94,315 Deferred tax asset 9 733,000 148,302 733,000 Total non-current assets 3,909,978 2,906,392 3,941,158 Current assets Inventories 177,964 183,097 214,974 Trade and other receivables 143,103 137,647 124,855 Cash at banks and in hand 3,353,059 5,338,593 4,358,814 Total current assets 3,674,126 5,659,337 4,698,643 Total assets 7,584,104 8,565,729 8,639,801 EQUITY AND LIABILITIES Capital and reserves Called up share capital 6 10,128,006 10,128,006 10,128,006 Share premium 6 1,959,535 1,959,535 1,959,535 Accumulated losses (6,477,892) (5,673,368) (5,925,178) Shareholders' equity 5,609,649 6,414,173 6,162,363 Non-current liabilities Obligations under finance 38,432 83,084 61,037leases Total non-current liabilities 38,432 83,084 61,037 Current liabilities Trade and other payables 1,891,371 1,998,849 2,363,630 Obligations under finance 44,652 69,623 52,771leases Total current liabilities 1,936,023 2,068,472 2,416,401 Total equity and liabilities 7,584,104 8,565,729
8,639,801
The accompanying notes 1 to 10 are an integral part of this interim report.
SUMMARY STATEMENT OF 6 months 6 months 12 months ending ending ending CASH FLOWS (Expressed in Swiss francs) 30 June 30 June 31 December 2007 2006 2006 CHF CHF CHF OPERATING ACTIVITIES Operating cash outflows before (288,184) (798,324) (1,453,151)movements in working capital ( Decrease)/ increase in working (558,235) 477,338 823,034capital
(stocks ,debtors & creditors *) Net cash flows from (applied) to (846,419) (320,986) (630,117)operations INVESTING ACTIVITIES Payments to acquire fixtures, (171,730) (580,380)
(1,269,941)
equipment, motor vehicles and software
Deposits (made) repaid (4,800) (3,000) (3,513) Net cash flows (outflows) from (176,530) (583,380) (1,273,454)investing activities
FINANCING & INVESTING ACTIVITIES
Payments under finance lease (30,724) (39,585) (78,484)obligations Net interest received (paid) 47,918 53,681 112,006 Net cash flows ( outflows) from 17,194 14,096
33,522
financing & investing activities Decrease in cash and cash equivalents (1,005,755) (890,270) (1,870,049)during the period/year Cash and cash equivalents :
- at the beginning of the period/year 4,358,814 6,228,863 6,228,863
- at the end of the period/ year 3,353,059 5,338,593
4,358,814
Cash and cash equivalents at the end of the period/year are represented by
: Cash at banks and in hand 3,353,059 5,338,593 4,358,814
* In the 6 months period to 30 June 2007 the Company settled liabilities of CHF325,457 which had been provided for in the balance sheet at 31 December 2006resulting in the decrease of working capital funds during the period underreview.
STATEMENT OF MOVEMENT IN SHAREHOLDERS' FUNDS
Called up Share Accumulated Total share premium losses capital CHF CHF CHF CHF Balance at 1st January 2006 10,128,006 1,959,535 (4,611,358) 7,476,183 Movements during the period/ year : Loss for the ended year 2006 - - (1,313,820) (1,313,820) Balance at 31 December 2006 10,128,006 1,959,535 (5,925,178) 6,162,363 Loss for 6 months ended 30 - - (552,714) (552,714)June 2007 Balance at 30 June 2007 10,128,006 1,959,535 (6,477,892) 5,609,649Interim report notes: 1. 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 in Switzerland.
2. Directors' responsibility
The interim report and financial information contained therein are the responsibility of the Board of directors of Global Brands S.A. The interim
report was approved by the Board of Directors on 5 September 2007. The interim report for the 6 months period to 30 June 2007 is unaudited.
The financial information relating to the year ended 31 December 2006 is extracted from the statutory audited annual accounts as adjusted for International Financial Reporting Standards ("IFRS"). The reports of the auditors, PKF Luxembourg, on the statutory annual accounts and on the IFRS financial statements at 31 December 2006 were unqualified. The statutory annual accounts for the year ended 31 December 2006 drawn up in accordance with Luxembourg law and generally accepted accounting practices havebeen delivered to the Registrar of Trade and Companies in Luxembourg where theyare available for public inspection.
3. Basis of accounting The interim financial statements of Global Brands S.A. for the 6 months ended 30 June 2007 and 30 June 2006 have been prepared using accounting policies on abasis consistent with those adopted for the year ended 31 December 2006.
The financial information has been prepared on the historical cost basis. It should be noted that accounting estimates and assumptions are used in the
preparation of the financial information. Although these estimates are based onmanagement's best knowledge of current events and actions, actual results may ultimately differ from those estimates.
The Company prepared its first set of IFRS compliance financial statements for the year ended 31 December 2004. Adjustments have been made to the numbers
presented in the local statutory annual accounts to bring them in line with
IFRS. The differences between IFRS and local Luxembourg accounting practices ( Lux GAAP) relate to accounting for:
* deferred tax which is not allowed under Lux GAAP.
* establishment costs are charged against the share premium account whereas
Lux GAAP is to capitalize and amortise them over 5 years. The financial information is stated in Swiss Francs (`CHF') which is the currency of the issued share capital of the company in Luxembourg and the Company's functional currency.
4. Analysis of results Revenue, operations, profits and net assets are attributable entirely to its single business segment of selling pizzas. The Company's turnover and trading results arises entirely in Switzerland. Turnover and results are from
continuing activities.
The Board measures performance by using the EBITA (earnings before interest, tax and amortization) performance measure.
5. Earnings (loss) per share ( "EPS") The calculation of basic earnings / (loss) per share is based on
the following data: 30 June 30 June 31 December 2007 2006 2006 Number of issued shares of CHF 2.10 4,822,860 4,822,860 4,822,860 each
The weighted average number of shares 4,822,860 4,822,860 4,822,860 in circulation during the period/year
is CHF CHF CHF Loss for the year (552,714) (1,062,010) (1,313,820) Basic earnings (loss) per share (0.115) (0.220)
(0.272)
Share options issued.
At 30 June 2007 the following share options were issued to members of the Boardof directors:- at exercise price of 379,518GBP 1.85 - at exercise price of 48,229GBP 1.15 Total options issued 427,747The directors consider that there is no dilutive effect of share options issuedon EPS because the market values of the shares is substantially lower than theexercise price so that it is most improbable that the options would beexercised at their exercise price of ‚£ 1.85 and ‚£ 1.15.6. Share capital and share premium :
30 June 30 June 31 December 2007 2006 2006 Share capital CHF CHF CHF
Allotted, issued and fully paid up
10,128,006 10,128,006 10,128,006 Share premium on issue of new shares 1,939,535 4,348,500 4,348,500Less charges of raising finance - (2,388,965) (2,388,965) Share premium balance at end of period / year 1,939,535 1,939,535 1,939,535 Number of shares of CHF 2.10 each 4,822,860 4,822,860 4,822,860
The Company has one class of share carrying the same voting and dividend distribution rights.
At 30 June 2007 the number of shares in circulation was 4,822,860 shares of CHF 2.10 each, giving a total subscribed and fully paid up share capital of CHF 10,128,006.
On 1st August 2005, the general meeting of shareholders of the Company approveda stock option plan for the benefit of the employees and directors. Options for427,747 shares of CHF 2.10 each are issued as set out in Note 5. None of theoptions has been exercised.7. Taxation
There is no taxation charge because the Company has incurred losses in the
current period and prior financial years so that the tax losses are available to offset the profits of the financial period/ year 2007 and 2006.
8. Extraordinary income ( charges)
Extraordinary income and charges include items relating to prior periods and exceptional advertising and marketing charges incurred in respect of the
extension of the business comprising the opening of new stores.
9. Deferred tax asset
The Company has tax losses available to reduce taxable profits in future
periods. Having regard to the forecast of operations and profits over the years 2007-2010, the directors consider that the potential future tax savings
available in Switzerland should be recorded in these financial statements as a deferred tax asset. 10. Contractual commitments
Under contractual commitments, the Company is obligated to pay performance remuneration to directors which is conditional on the Company achieving
performance targets. Provisions for these charges have not been made in these accounts until those targets are met.
For further information, please contact:
Global Brands Dov Lachovitz Telephone : 00 41 79 77 44 627 Ruegg & Co Limited Brett Miller/Roxane Marffy
Telephone : 00 44 (0)20 7584 3663
GLOBAL BRANDS S.A.