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Unaudited Condensed Group Interim Financial Restults for the six months ended 31 August 2016
GOLD BRANDS INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2015/168426/06)
JSE code: GBI
ISIN: ZAE000212791
("Gold Brands" or "the Company" or "the Group")
UNAUDITED CONDENSED GROUP INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2016
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited Audited
6 months 6 months 12 months
31 August 31 August 29 February
2016 2015 2016
R R R
Revenue 100 613 053 116 680 807 235 502 971
Cost of sales (69 537 159) (84 334 937) (174 894 524)
Gross profit 31 075 894 32 345 870 60 608 447
Other income 1 254 720 333 084 1 837 985
Operating expenses (25 924 345) (28 014 297) (49 087 061)
Earnings before interest, taxation,
depreciation and amortisation 6 406 269 4 664 657 13 359 371
Depreciation and amortisation (1 298 432) (1 156 052) (2 388 668)
Profit before interest and taxation 5 107 837 3 508 605 10 970 703
Investment revenue 69 806 1 394 283 2 309 314
Finance costs (328 954) (379 856) (928 106)
Profit before taxation 4 848 689 4 523 032 12 351 911
Taxation (1 345 761) (1 563 048) (3 398 031)
Profit for the year 3 502 928 2 959 984 8 953 880
Other comprehensive income - - -
Total comprehensive income
for the year 3 502 928 2 959 984 8 953 880
Attributable to:
Equity holders of the company 3 502 928 2 959 984 8 953 880
Earnings per share attributable to
equity holders of the company
Basic earnings per share (cents) 3.18 3.48 10.25
Headline earnings per share
(cents) 3.18 3.48 10.25
Diluted earnings per share (cents) 3.18 3.48 10.25
Diluted headline earnings per share (cents) 3.18 3.48 10.25
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Audited Audited
31 August 2016 31 August 2015 29 February 2016
R R R
ASSETS
Non-current assets 23 715 924 22 030 114 24 053 742
Property, plant and equipment 10 806 312 10 213 586 12 172 550
Goodwill 5 931 416 5 931 416 5 931 416
Intangible assets 5 885 112 5 885 112 5 885 112
Deferred taxation 1 093 084 - 64 664
Current assets 73 037 345 41 081 954 67 614 486
Inventories 19 943 998 12 685 569 17 521 409
Other financial assets 11 712 125 15 452 595 17 679 717
Current tax receivable 1 833 059 - 1 882 765
Trade and other receivables 38 962 900 11 025 400 27 423 289
Cash and cash equivalents 585 263 1 918 390 3 107 306
Total assets 96 753 269 63 112 068 91 668 228
EQUITY AND LIABILITIES
Equity 57 333 808 22 836 984 53 830 880
Share capital 44 877 000 19 877 000 44 877 000
Retained income 12 456 808 2 959 984 8 953 880
Non-current liabilities 4 113 049 4 457 337 4 884 999
Instalment sale obligation 4 062 738 4 063 463 4 884 999
Deferred taxation 50 311 393 874 -
Current liabilities 35 306 412 35 817 747 32 952 349
Current tax payable 4 505 696 4 110 027 2 231 529
Instalment sale obligation 1 584 544 1 005 973 1 779 085
Operating lease liability 369 682 - 780 517
Trade and other payables 28 822 278 30 701 747 28 161 218
Bank overdraft 24 212 - -
Total equity and liabilities 96 753 269 63 112 068 91 668 228
Number of ordinary shares in issue at
year-end 110 000 000 85 000 000 110 000 000
Net asset value per share (cents) 52.12 26.87 48.94
Net tangible asset value per share (cents) 41.38 12.97 38.19
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Audited Audited
31 August 31 August 29 February
2016 2015 2016
R R R
Balance at beginning period 53 830 880 - -
Profit for the period 3 502 928 2 959 984 8 953 880
Other comprehensive income - - -
Total comprehensive income for the period 3 502 928 2 959 984 8 953 880
Issue of shares - 19 877 000 44 877 000
Balance at end of period 57 333 808 22 836 984 53 830 880
CONDENSED GROUP STATEMENT OF CASH FLOWS
Unaudited Audited Audited
31 August 31 August 29 February
2016 2015 2016
R R R
Cash flows generated from/ (utilised in)
operating activities (7 564 853) 9 940 681 (10 021 811)
Cash flows generated from/(utilised in)
investing activities 6 035 398 (7 310 645) (10 655 961))
Cash flows generated from/(utilized in)
financing activities (1 016 800) (711 646) 23 785 078
Net increase/(decrease) in cash and cash
equivalents (2 546 255) 1 918 390 3 107 306
Cash and cash equivalents at the beginning of
the period 3 107 306 - -
Cash and cash equivalents at the end of the
period 561 051 1 918 390 3 107 306
SEGMENTAL REPORTING
IFRS 8 requires an entity to report financial and descriptive information about its reportable segments,
which are operating segments or aggregations of operating segments that meet specific criteria.
Operating segments are components of an entity about which separate financial information is
available that is evaluated regularly by the chief operating decision maker.
Therefore, the Group determines and presents its operating segments based on the information that is
internally provided to the Chief Executive Officer, who is the chief operating decision maker.
Furthermore, a segment is a distinguishable component of the group that is engaged either in
providing related products or services (business segment), in providing products or services within a
particular economic environment (geographical segment), which is subject to risks and returns that are
different from those of the other segments.
The Group does not have different operating segments. The business is conducted in South Africa and
is managed at a central head office with no branches. The Group is managed as one operating unit.
All revenues from external customers originate in South Africa, or from operations in South Africa.
NOTES TO THE FINANCIAL INFORMATION
Reconciliation of headline earnings for the year
Unaudited Audited Audited
31 August 31 August 29 February
2016 2015 2016
R R R
Earnings attributable to ordinary shareholders 3 502 928 2 959 984 8 953 880
Adjusted for: - - -
Headline earnings attributable to ordinary
shareholders 3 502 928 2 959 984 8 953 880
Weighted average shares in issue (number) 110 000 000 85 000 000 87 358 904
Weighted average diluted shares in issue
(number) 110 000 000 85 000 000 87 358 904
Basic earnings per share (cents) 3.18 3.48 10.25
Diluted earnings per share (cents) 3.18 3.48 10.25
Headline earnings per share (cents) 3.18 3.48 10.25
Diluted headline earnings per share (cents) 3.18 3.48 10.25
OVERVIEW
The group has enjoyed significant growth in the Chesanyama brand, supporting the rapid roll out of
the store network; launching several new brands and acquiring BlackSteer into the Gold Brands stable
in its first four years. Its focus in the six months to 31 August 2016 turned to enhancing internal
controls and increasing its capacity to support its growing franchisee base.
The muted domestic economy impacted the group's roll out of new stores during the period, as a
result of less funding being made available for new franchises. Constrained consumer spending in
lower LSMs was also a factor. This was however offset by growing customer support in the middle-
income market.
Against this backdrop, the group was proactive, implementing a number of initiatives to manage its
input costs and in so doing, improving gross margins and delivering positive net income growth.
OPERATIONAL OVERVIEW
Gold Brands has made significant progress during the last six months in enhancing its head office
capacity to add value to its existing franchise base and ensure its ability to support new franchisees. A
number of skilled industry specialists were recruited into the operational team, with the aim of
working more closely with franchisees to ensure profitability at store level and enhancing franchisee
loyalty. A milestone was the recruitment of Manny Nichas, former CEO of Ocean Basket. His focus
has been to work with franchisees to ensure compliance across the store network. A training executive
has been employed to ensure consistent standards across all stores.
Following the rapid growth experienced by the group over the last 18 months, as a result of the
significant demand from new franchisees, which enabled the accelerated roll out of the Chesanyama
brand to more than 300 stores, the group has now implemented more stringent processes and selection
requirements for its new franchisees. During the period, a review was also carried out with regard to
the quality of existing operators and a process is underway to close or relocate non-performing stores
with the objective of guaranteeing consistent quality and service standards to end-consumers across
all outlets. Franchisee selection processes have been reviewed, with a continued preference for hands
on operators. Extended franchisee training programmes provided by the head office are also under
development and improved support structures to assist franchisees in building their businesses are
being formulated. The group is confident that these initiatives will reposition its brands to continue
growing profitably.
The investments to bring additional production and distribution capacity in-house are paying off. The
production of spices and sauces in-house has been bedded down and contributed to higher margins
during the period. Furthermore, the meat processing and pre-cooking is also finding favour among
franchisees and providing more consistent meals to end consumers.
FINANCIAL OVERVIEW
Revenue for the period was down 13.8% to R100.6 million, reflecting the overall slowdown in the
economy, which is not only affecting the opening of new stores but also the revenue of the existing
stores and the slower uptake of new franchises in the period, in line with the group's more selective
approach to new hands on franchisees as well as financial institutions' stricter lending requirements.
Menu prices were increased, on average, by 8% in March 2016, having absorbed higher input costs to
continue offering value to consumers for as long as possible.
The benefits of streamlining Gold Brands' procurement arrangements with selected suppliers as well
as investing in its own freezer facility and doing away with leased refrigerated containers, contributed
to a 17.5% reduction in cost of sales. Improved internal controls and procedures also supported the
higher gross margin, which increased to 30.9% from 27.7% in the comparable period. Increased in-
house production of spices, sauces and preparation of meat menu items also contributed to the
increased profitability.
Operating expenses declined 7.4% to R25.9 million, notwithstanding the recruitment of sector specific
skills to increase franchisee-support capacity at head office. The group achieved lower transport costs
as a result of better route planning while maintenance costs decreased due to capital investments in
new equipment. Tighter internal control of operating expenses was also beneficial.
Gold Brands recorded a 15.9% increase in profit after tax to R3.5 million for the six months,
translating into headline earnings per share of 3.18 cents.
Net working capital rose to R37.7 million up from R5.3 million a year ago. Factors contributing to the
increases included an additional R7.3 million in inventories* due to repurchasing several strategically
located stores from franchisees to defend these sites. The higher trade and other receivables of R39.0
million, was impacted by the timing of new BlackSteer franchise fees (R11 million).
Note:* Inventories include normal inventory for resale as well as Company owned stores as per IFRS
The group closed the period with cash and cash equivalents of R585 263.
The net asset value per share increased 94% to 52.12 cents from a year ago and up 6.5% from
28 February 2016.
BASIS OF PREPARATION
The condensed Group interim financial results included in this announcement have been prepared in
accordance with the recognition and measurement criteria of International Financial Reporting
Standards ("IFRS"), and have been prepared in accordance with the presentation and disclosure
requirements of IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee, and Financial Pronouncements as issued by the Financial
Reporting Standards Council, the Listings Requirements of the JSE Limited, and the requirements of
the South African Companies Act.
The condensed Group interim financial results are prepared in accordance with the going concern
principle under the historical cost basis as modified by the fair value accounting of certain assets and
liabilities where required or permitted by IFRS. These condensed group interim financial results are
presented in the South African Rand, which is the group's functional and presentation currency.
These condensed Group interim financial results incorporate the financial results of the company and
its subsidiaries. Results of subsidiaries are included from the effective date of acquisition. All
significant transactions and balances between group enterprises are eliminated on consolidation.
The preparation of the condensed Group interim financial results was supervised by the Financial
Director, Terence Ballard. The directors take full responsibility for the preparation of the condensed
Group interim financial results.
GOING CONCERN
The board of directors is of the opinion that, having regard to the current status and the future strategy
of the Group, the Group has sufficient resources to continue as a going concern.
CONTINGENCIES
The directors are not aware of any material contingent liability which existed at the reporting date and
up to the date of this report requiring disclosure.
FINANCIAL INSTRUMENTS RECOGNISED AT FAIR VALUE
The Group doesn't recognise any of its financial instruments at fair value. The carrying values of the
group's financial instruments however approximates their fair values.
SUBSEQUENT EVENTS
The directors are not aware of any matter or circumstance arising since the reporting date which
would have a material effect on the condensed group interim financial results.
DIVIDEND POLICY
No ordinary dividends were declared, and no ordinary dividend is proposed for the interim period.
PROSPECTS
Although the outlook for the domestic economy remains uncertain, Gold Brands' flagship
Chesanyama and BlackSteer brands are well-entrenched in their key markets. In particular, demand
for Chesanyama is growing in more affluent segments of the market ,which bodes well for new store
openings. Having tightened its selection criteria for new franchisees, extended its processing and
distribution infrastructure as well as bolstering the operational support structures and capacity, Gold
Brands is well positioned to weather current economic environment.
The roll out of updated Chesanyama branding has commenced, to capitalise on increasing demand for
Chesanyama in the middle market. This is in line with the changing perception of the brand,
expanding from its emerging market roots into more affluent market segments. At BlackSteer, the
look and feel of the restaurants and menus is being upgraded to ensure that the chain maintains its
position as a premium brand. A recent review of Gold Brands' chicken portfolio identified a gap in
the convenience rotisserie chicken segment and accordingly a consolidation of its Hot Chicks and
Wild Wings brands into a single offering is under review.
Opportunities to acquire additional manufacturing and processing capacity in-house present growth
potential while the launch of new and exciting concepts to expand the portfolio offshore is
continuously under review.
CHANGES TO THE BOARD OF DIRECTORS
There have been no change in directors since the Annual General Meeting of the company held on
6 October 2016.
By order of the Board
28 November 2016
Efpraxia Nathanael Terrence Ballard
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors: Clifford David Raphiri; Christos Kassianides; Valentine Nichas.
Executive directors: Efpraxia Nathanael ("Praxia"); Terrence Craig Ballard
Registration number: 2015/168426/06
Registered address: 195 Witch-Hazel Avenue, Highveld Technopark, Centurion, 0046
Postal address: PO Box 290, Cornwall Hill, Irene, 0178
Company secretary: River Group
Telephone: (012)346 8540
Transfer secretaries: Trifecta Capital Investor Service (Pty) Limited
Designated Adviser: River Group
These results are available on the Company website and the presentation to investors will be
available on the website from Wednesday, 30 November 2016.
28 November 2016
Johannesburg
Corporate and Designated Adviser
River Group
Date: 28/11/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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