Wrap Text
Provisional Reviewed Condensed Group Financial Results for the Year Ended 28 February 2018
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”)
PROVISIONAL REVIEWED CONDENSED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2018
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
February February
2018 2017
R R
Revenue 40 168 181 142 785 184
Cost of sales (24 703 847) (126 516 074)
Gross profit 15 464 334 16 269 110
Other income 2 387 035 3 783 417
Loss on disposal and re-measurement of non-current assets held for sale (2 755 367) (3 625 482)
Operating expenses (28 075 233) (62 189 361)
Loss before interest, taxation and depreciation (12 979 231) (45 762 316)
Depreciation (992 728) (1 946 311)
Loss before interest and taxation (13 971 959) (47 708 627)
Investment revenue 2 088 428 3 560 594
Finance costs (4 222 177) (4 072 103)
Loss before taxation (16 105 708) (48 220 136)
Taxation 82 805 (292 439)
Loss for the year (16 022 903) (48 512 575)
Other comprehensive income - -
Total comprehensive loss for the year (16 022 903) (48 512 575)
Attributable to:
Equity holders of the Company (16 022 903) (48 512 575)
Loss per share attributable to equity holders of the Company:
Basic loss per share (cents) (14.55) (44.10)
Headline loss per share (cents) (12.27) (40.89)
Diluted basic loss per share (cents) (14.55) (44.10)
Diluted headline loss per share (cents) (12.27) (40.89)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed Audited
February February
2018 2017
R R
ASSETS
Non-current assets 19 577 131 20 609 491
Property, plant and equipment 6 875 282 8 777 577
Goodwill 5 931 416 5 931 416
Intangible assets 5 885 112 5 885 112
Deferred tax 885 321 15 386
Current assets 18 504 480 32 988 878
Inventories 1 844 197 3 063 835
Trade and other receivables 8 356 673 12 525 675
Other financial assets 6 428 783 14 672 941
Operating lease asset 129 008 701 308
Current tax receivable 1 645 822 1 882 765
Cash and cash equivalents 99 997 142 354
Non-current assets held for sale 3 023 481 6 523 071
Total assets 41 105 092 60 121 440
EQUITY AND LIABILITIES
Equity (8 083 716) 5 318 306
Share capital 47 497 880 44 877 000
Retained income (55 581 596) (39 558 694)
Non-current liabilities 2 202 424 4 027 498
Instalment sale obligations 2 014 759 3 784 337
Deferred tax 187 665 243 161
Current liabilities 46 986 384 50 775 636
Trade and other payables 37 929 448 40 916 953
Instalment sale obligations 1 178 031 1 608 940
Operating lease liability 129 008 717 985
Deferred Income 1 561 263 -
Provisions 854 500 850 000
Current tax payable 2 837 212 2 231 529
Bank overdraft 2 496 922 4 450 229
Total equity and liabilities 41 105 092 60 121 440
Number of ordinary shares in issue at year-end 113 500 000 110 000 000
Net asset / (liability) value per share (cents) (7.12) 4.83
Net tangible liability value per share (cents) (17.53) (5.91)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Share capital Retained income Total equity
R R R
Balance at 1 March 2016 44 877 000 8 953 881 53 830 881
Loss for the year - (48 512 575) (48 512 575)
Other comprehensive income - - -
Balance at 1 March 2017 44 877 000 (39 558 694) 5 318 306
Loss for the year - (16 022 903) (16 022 903)
Other comprehensive income - - -
Total comprehensive loss for the year - (16 022 903) (16 022 903)
Issue of shares 2 620 880 - 2 620 880
Balance as at 28 February 2018 47 497 880 (55 581 597) (8 083 717)
CONDENSED GROUP STATEMENT OF CASH FLOWS
Reviewed Audited
February February
2018 2017
R R
Cash flows from operating activities
Cash utilised in operations (5 564 632) (6 517 509)
Investment revenue 6 476 3 428
Finance costs (1 063 304) (1 354 616)
Tax paid - -
Net cash utilised in operating activities (6 621 460) (7 868 697)
Cash flows from investing activities
Purchase of property, plant and equipment (248 526) (79 102)
Proceeds from disposal of property, plant and equipment 888 608 390 090
Cash flows from non-current assets held for sale 744 222 (4 197 185)
Other financial asset advances 19 157 720 7 185 402
Repayments of other financial assets (10 809 127) -
Net cash generated from/(utilised in) investing activities
9 732 897 3 299 205
Cash flows from financing activities
Proceeds from share issue 1 000 000 -
Instalment sale obligation payments (2 200 487) (2 845 689)
Net cash utilised in financing activities (1 200 487) (2 845 689)
Total cash movement for the year 1 910 950 (7 415 181)
Cash and cash equivalents at the beginning of the year (4 307 875) 3 107 306
Total cash and cash equivalents at the end of the year (2 396 925) (4 307 875)
NOTES TO THE FINANCIAL INFORMATION
Reconciliation of headline earnings for the year
Reviewed Audited
February February
2018 2017
R R
Earnings attributable to ordinary shareholders (16 022 903) (48 512 575)
Adjusted for:
After tax profit on disposal of property, plant and
equipment (35 094) (95 159)
After tax loss on disposal of non-current assets held for
sale 549 953
Loss on re-measurement of non-current assets held for
sale 1 991 544 3 625 482
Headline loss attributable to ordinary shareholders (13 516 499) (44 982 252)
Weighted average shares in issue (number) 110 136 438 110 000 000
Weighted average diluted shares in issue (number) 110 136 438 110 000 000
Basic loss per share (cents) (14.55) (44.10)
Headline loss per share (cents) (12.27) (40.89)
Diluted basic loss per share (cents) (14.55) (44.10)
Diluted headline loss per share (cents) (12.27) (40.89)
OVERVIEW
The Directors herewith present the financial results of the Group for the year ended 28 February 2018. Gold Brands
Investments Limited is a franchisor, brand owner, service provider and an educator of food offerings and products.
The Group has its franchise food footprint through the following franchise food chains: Chesanyama, 1+1 Pizza,
Opa!Pitaland, Chicken Wild Wings and Blacksteer.
Although the Company has seen losses in the past financial year, management has added value to the Company,
strengthening the portfolio by establishing partnerships with well-known local and international brands.
The success of a brand in the restaurant industry is dependent on the consumer at store level. The founders of our
flagship brand, Chesanyama, have created a successful brand serving more than 2 million customers per month.
Management is continuing to capitalise on the increasing demand for Chesanyama in the middle to upper LSM.
Over the last five years, South Africa and neighbouring countries have seen the brand develop into a unique
household “braai” brand in the QSR industry and to date our COO and founder of the brand continues to implement
changes to the brand model, in order to keep the target market and consumer preferences a priority. Although our
number of stores decreased to 141 outlets in FY2018, our system-wide sales for FY2018 was R294.8 million with an
increase in average store sales of 5.2% and an increase in average spend per transaction at store level of 6.77%.
Chesanyama aims at always providing value for money meals and keeping up with the trends of the current and
future markets.
The Casual Dining Group partnership has afforded Gold Brands the opportunity to launch a portfolio of diverse
brands with cultural flavours. Management has seen opportunities and potential in the launching of new and
exciting concepts from the U.K. Specific locations have been earmarked in shopping centres in more affluent areas
to launch these brands, creating two streams of revenue - Corporate Store Sales as well as Distribution Centre sales.
Las Iguanas has an adventure for our customers. They will experience the irresistible bolt of Latin American energy
and mouth-watering new taste and feel. Being one of its kind in South Africa, each Las Iguanas restaurant will be
unique because each is filled with different treasures from our favourite continents, whether it be a piece of artisan
furniture or a special dish on the menu. Café Rouge is a French Bistro red wine bar, something unique to South
Africa.
Gold Brands has implemented internal and external economic systems which decrease financial risks, with our core
product (meat) being moved to an outsourced online pre-paid purchase system.
More focus has been placed on improving the 1+1 Pizza brand, through menu improvement and this brand already
saw three more stores opening in 2018 with a further three to open in the near future.
Our acquisition of the well-known American themed, Ed’s Diner restaurants, will add sales to our Distribution
Centre.
OPERATIONAL OVERVIEW
Following the losses experienced from store closures due to lease expiries, Management has and is continuously
re-evaluating the potential of the demographics of existing stores. The Group has continued to implement more
stringent processes and selection requirements for its locations and business partners. The brand image has been
re-engineered and the business model is now moving into the newly identified market gap, being mid to upper LSM
with larger seating areas increasing foot traffic and store sales.
Hands-on franchisee selection has shown a successful turnaround where new business partners are showing
profitable, brand-enhancing stores with increased customer satisfaction and dedication. Extended franchisee
training programmes developed and provided by Head Office continue to enhance franchisee ability to run
successful businesses while maintaining high brand standards. This support is further enhanced by the continued
consultation, support and advanced training programmes within the QSR industry by our approved service
providers.
The Company has decided to re-engineer all of our food brands by offering a 51%-49% opportunity to potential
owner-operator individuals with the brand owner holding the majority stake and controlling the store. Existing
stores will have the option, should the brand owner accept, to sell 51% of the existing store to the brand owner.
This will increase compliancy in stores, providing higher store sales and in turn increased revenue to our distribution
centre, as well as add to goodwill and increase Company revenue. The Group is confident that these initiatives will
reposition its brands to continue growing profitably nationally, on the African continent and internationally.
With our focus being on our customers, the key driver in this transformative year for Gold Brands is our owner-
operator business partnerships which add value to our brands and satisfaction to our customers. We continue to
source tasty, quality products for our end users.
FINANCIAL RESULTS
General
While gross profit decreased by 4.95% from R16.3 million in the comparable period to R15.5 million and revenue
declined 71.9% from R143 million in FY2017 to R40.2 million for the current year, the gross profit margin increased
from 11.4% to 38.5%. This can be ascribed to management’s decision to reduce costs and risks of debtor
impairment by using an outsourced online platform for meat supply to franchisees, which contributed to reduced
losses associated with food manufacturing.
The benefits of streamlining Gold Brands’ procurement arrangements with selected suppliers contributed to a
80.5% reduction in cost of sales year-on-year.
Operating expenses declined year-on-year by 54.9% to R28.1 million as management continued improvement in
internal controls and procedures.
Finance costs increased from R4.1 million to 4.2 million due to reversal of prior year discounting of revenue and
purchases.
Impairment of trade receivables
Management have assessed the recoverability of debtors and have impaired debtors by R3.9 million and recognised
a further impairment provision of debtors at year end of R3.8 million.
Non-current assets held for sale
The Group acquired stores from franchisees during the year and disposed of stores acquired from franchisees with
a carrying value of R 2.5 million.
The Group also re-measured the carrying values of stores acquired from franchisees to fair value less cost to sell at
year end. This resulted is a re-measurement loss of R2 million.
Chesanyama stores acquired from franchisees have been reduced from 5 at 28 February 2017 to 1 at 28 February
2018, and Blacksteer stores acquired from franchisees increased from zero at 28 February 2017 to 1 at 28 February
2018.
BASIS OF PREPARATION
The condensed Group financial results are prepared in accordance with the requirements of the JSE Limited Listings
Requirements for provisional reports, and the requirements of the Companies Act of South Africa applicable to
summary financial statements. The Listings Requirements require provisional reports to be prepared in accordance
with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a
minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied
in the preparation of the Group financial results from which the condensed financial results were derived are in
terms of International Financial Reporting Standards and are consistent with those accounting policies applied in
the preparation of the previous Group annual financial results.
The accounting policies applied in the preparation of the condensed Group financial results are consistent with
those applied in the preparation of the previous Group financial results.
The condensed Group financial results are prepared in accordance with the going concern principle under the
historical cost basis. These condensed Group financial results are presented in South African Rand, which is the
Group’s functional and presentation currency.
These condensed Group 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 financial results for the year ended 28 February 2018 was supervised by
the Financial Director, Terence Ballard.
The directors take full responsibility for the preparation of the condensed Group financial results for the year ended
28 February 2018.
GOING CONCERN
The financial results indicate that the Group incurred a net loss of R 16.0 million for the year ended 28 February
2018 (2017: net loss of R 48.5 million) and, at that date, its total liabilities exceeded its total assets by R 8.0 million
(2017: total assets exceeded its total liabilities by R 5.3 million) and, its total current liabilities exceeded its total
current assets by R 28.4 million.
These conditions indicate that a material uncertainty exists that may cast a significant doubt on the Group’s ability
to continue as a going concern.
Per the cautionary announcement released on SENS on 29 June 2018, the Company has received interest by a third
party to acquire a subsidiary of Gold Brands and the Board of Directors of the Company (“Board”) has decided to
enter into a formal process to evaluate the disposal of such subsidiary in order to increase cash flow into the
Company, settle debt and utilise surplus cash resources to open our corporate owned international brand stores.
The introduction of our new themed brands into our portfolio makes the Group unique in the food industry and
hence is attracting interest from investors wanting to participate in our unique concepts. This new portfolio of
brands is expected to give a higher return on investment, driving new business sales as well as sales through our
Distribution Centre.
Management has continued with a number of strategic interventions to improve the revenue, profitability and
liquidity position of the Group, which include:
- Outsourced online ordering platform has limited our risk on meat supplies.
- The supply of all our licensed sauces and spices from Gold Brands Food Services to our franchised outlets
has contributed to our increased GP.
- The additional supply of sauces and spices as at day of reporting has been introduced into retail
supermarkets which will contribute to increased revenues for the Group.
- Internal restructuring has been completed in the last financial year.
- Discussions and arrangements have been made with most of the major creditors and repayments continue.
- The Directors have made a strategic decision not to receive a full salary until the financial position of the
Group improves.
Furthermore, after performing a thorough review of the Group strategies implemented and of the Group’s cash
flow forecasts and budgets, and considering the uncertainties described above, the directors have a reasonable
expectation that the Group has adequate resources to continue operations for the foreseeable future.
For these reasons, and the effects of the interventions above on the first quarter of 2019, the board continued to
adopt the going concern basis of accounting to prepare the financial results.
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.
FINANCIAL RISK MANAGEMENT
The Group’s financial risk management objectives and policies are consistent with those disclosed in the Group’s
financial statements for the year ended 28 February 2017.
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.
The Chief Executive Officer of the Group, is the chief operating decision maker. She evaluates the financial
information of the Group as one operating unit. Separate operating segment financial information is not available.
Therefore IFRS 8 was not implemented.
RELATED PARTY BALANCES
Shareholder with significant influence: E Nathanael
Holdings of members of key management Sydiveda Proprietary Limited
Holdings of relatives of key management Chesanyama UK Limited
Holdings of relatives of key management Mybraai Proprietary Limited
Members of key management E Nathanael
T C Ballard
Unaudited Audited
28 February 28 February
2018 2017
R R
Sydiveda Proprietary Limited (loan to holding of member of key
management) 6 428 783 14 672 941
Chesanyama UK Limited 356 000 -
Mybraai Proprietary Limited (debtor is related to key management) 473,854 -
TC Ballard - (698 004)
7 258 637 13 974 937
The Group also entered into a few other transactions with related parties which were in the ordinary course of
business, and on an arm’s length basis, and which were consistent with the previous period and not significant.
ISSUE OF SHARES
- 200 000 ordinary shares were issued at 100 cents per share on 28 July 2017
- 1 000 000 ordinary shares were issued at 100 cents per share on 27 February 2018
- 2 300 000 ordinary shares were issued at 73 cents per share on 27 February 2018
This resulted in the total number of ordinary shares issued of 113 500 000.
CHANGES IN PROPERTY PLANT AND EQUIPMENT
The Group disposed of vehicles at a carrying value of R839 866 due to changes in operational requirements. No
substantial additional assets were acquired.
CONTINGENCIES
Various legal proceedings were instituted against the Group. The Group’s legal advisors are actively defending these
matters.
EVENTS AFTER BALANCE SHEET
Per the cautionary announcement released on SENS on 29 June 2018, the Company has received interest by a third
party to acquire a subsidiary of Gold Brands and the Board of Directors of the Company has decided to enter into a
formal process to evaluate the disposal of such subsidiary in order to increase cash flow into the Company.
REVIEW CONCLUSION
These condensed group financial statements for the year ended 28 February 2018 have been reviewed by Nexia
SAB&T, who expressed a disclaimer review conclusion. The auditor’s report contained the following Basis of
Disclaimer, Disclaimer of Conclusion and Reportable Irregularity Paragraphs:
“Basis for Disclaimer of Conclusion
As indicated in the going concern note to the provisional condensed group financial statements, the group incurred a net loss
of R 16.0 million for the year ended 28 February 2018 (2017: net loss of R 48.5 million) and, at that date, its total liabilities
exceeded its total assets by R 8.0 million (2017: total assets exceeded its total liabilities by R 5.3 million) and, its total current
liabilities exceeded its total current assets by R 28.4 million (2017: R 17.8 million).
The going concern note states that per the cautionary announcement released on SENS on 29 June 2018, the company has
received interest by a third party to acquire a subsidiary of Gold Brands, and the board of directors of the company have
decided to enter into a formal process to evaluate the disposal of such subsidiary in order to increase cash flow into the
company, settle debt and utilise surplus cash resources to open our corporate owned international brand stores. At the date
of this report, the proposed transaction was not in an advanced stage to assess its future impact on the Gold Brands
Investments Limited Group.
The note also stated that the introduction of new themed brands into the company’s portfolio makes the group unique in the
food industry and hence is attracting interest from investors wanting to participate in the company’s unique concepts. At the
date of this report, the directors have not provided any agreements concluded with investors.
On conclusion of our review work, the directors were still in the process of securing an appropriate level of funding to support
its current working capital and liquidity requirements. Furthermore, the directors were still in the early stages of the disposal
of its subsidiary, and in securing investors for its new themed brands. Accordingly, at the date of this report, the directors’
plans on both the current working capital and liquidity requirements were not sufficiently advanced to allow us to confirm or
dispel whether it’s appropriate for Gold Brands Investments Limited to prepare its financial statements using the going concern
basis of accounting.
Disclaimer of Conclusion
Due to the significance of the matter described in the Basis for Disclaimer of Conclusion paragraph, we were unable to obtain
sufficient appropriate evidence to form a conclusion on the provisional condensed group financial statements of Gold Brands
Investments Limited for the year ended 28 February 2018. Accordingly, we do not express a conclusion on these provisional
condensed group financial statements.
Report on Other Legal and Regulatory Requirements
In accordance with our responsibilities in terms of sections 44(2) and 44(3) of the Auditing Profession Act, we report that we
have identified a reportable irregularity in terms of the Auditing Profession Act. We have reported such matter to the
Independent Regulatory Board for Auditors. The matter pertaining to the reportable irregularity has been described in the
Reportable Irregularity paragraph of the provisional condensed group financial results.”
REPORTABLE IRREGULARITY
During the financial year, Gold Brands Investments Limited and its subsidiaries did not make payments relating to
Valued-Added Tax and Employees Tax to the South African Revenue Services.
A copy of the auditor’s review report is available for inspection at the Company’s registered office.
DIVIDEND POLICY
No ordinary dividends were declared, and no ordinary dividend is proposed for the year.
FORWARD LOOKING STATEMENTS
This report may contain certain forward-looking statements concerning Gold Brands’ operations, economic
performance and financial condition, plans and expectations. Such views involve both known and unknown risks,
assumptions, uncertainties and other important factors that could materially influence the actual performance of
the Company. No assurance can be given that these will prove to be correct and no representation or warranty
expressed or implied is given as to the accuracy or completeness of such views or as to any of the other information
in this report.
PROSPECTS
Driven by our innovation we continue to serve international unique tastes to our customers and value for money
meals. Our focus is on hands-on operators and partners to ensure sustainability and profitability. Trading conditions
remain tight in South Africa, due to the high cost of living as well as ever-increasing transport costs. We are however,
optimistic in attracting investors and partnerships with the Group’s brands.
The Group’s distinctive advantage in South Africa is its diverse array of authentic themed Quick Service Restaurants:
- our South African “braai” themed Chesanyama;
- Legendary BlackSteer ribs and gourmet burgers;
- Ed’s Classic American diners with its timeless retro-nostalgic décor mixed with modern consumer trends;
- the Latin American styled Las Iguanas with their own unique Brazilian bottled Las Iguanas Magnifica
Cachaça beer and awesome cocktails;
- Café Rouge’s French Bistros; and
- Italian casual dining at Bella Italia.
Since Gold Brands’ listing in 2016, the Company has actively been seeking to acquire value –added brands through
partnerships that will increase revenues in our Food Services division, and will continue to do so.
The upgraded “Braai-themed” brand Chesanyama, remains our key focus in South Africa and internationally,
through repositioning the brand into the middle to upper LSM areas.
CHANGES TO THE BOARD
The following changes to the Board occurred during the period under review:
Non- executive directors:
Appointments
Name Designation Appointment Date
Mr Christopher Hlekane Chairman of the Board
Member – Social and Ethics Committee
1 September 2017
Member – Audit and Risk Committee
Member – Remuneration and Nomination Committee
Ms Glory Isaacs Chairperson – Social and Ethics Committee
Chairperson – Remuneration and Nomination Committee 1 September 2017
Member – Audit and Risk Committee
Mr Rowan Fortuin Chairperson – Social and Ethics Committee
Chairperson – Remuneration and Nomination Committee 26 June 2018
Member – Audit and Risk Committee
Resignations
Name Designation Resignation Date
Mr C Raphiri Chairman of the Board
Member – Social and Ethics Committee
23 August 2017
Member – Audit and Risk Committee
Member – Remuneration and Nomination Committee
Ms Glory Isaacs Chairperson – Social and Ethics Committee
Chairperson – Remuneration and Nomination Committee 27 February 2018
Member – Audit and Risk Committee
APPRECIATION
The directors would like to thank the team, customers, strategic partners and suppliers for their continued support
during the year.
By order of the Board
2 July 2018
_______________________________ ___________________________________
EfPraxia Nathanael Terence Ballard
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors: Christopher Hlekane; Christos Kassianides; Rowan Fortuin
Executive directors: Efpraxia Nathanael (“Praxia”); Terence 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: Acorim Proprietary Limited
Telephone: (011) 325 6363
Transfer secretaries: Trifecta Capital Investor Service (Pty) Limited
Designated Adviser: Merchantec Capital
Date: 02/07/2018 07:24:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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