Gold Brands restructures as losses continue
INCE / 03 JULY 2018 - 04.30 / STEPHEN GUNNION
The casual dining chain has taken steps to improve its financial position and may sell one of its subsidiaries
Gold Brands says it is implementing a number of interventions to improve its revenue, profitability and liquidity as its financial position continues to raise red flags. The casual dining group's latest results have cast doubt on its ability to continue as a going concern, with liabilities outstripping assets and continuing losses.
Steps taken include a new outsourced online ordering platform, an internal restructuring and arrangements with its creditors. Directors have also elected not to receive a full salary until the group's financial position improves. It has also entered into a formal process to evaluate the disposal of a subsidiary after receiving an offer from a third party. This would increase its cash flow, help it to settle debt and allow it to open corporate-owned international brand stores.
Revenue declined 72% to R40.2 million in the year to end February as it closed some stores and relocated others. It reported a reduced loss of R16 million for the year, down from a R48.5 million loss last year, as its gross profit margin increased to 38.5% from 11.4%. It says the benefits of streamlining its procurement operations with selected suppliers contributed to an 80.5% reduction in the cost of sales year-on-year. Its diluted headline loss per share declined to 12.27c from 40.89c.
The group says its partnership with UK-based mid-market restaurant operator Casual Dining Group has given it the opportunity to bring new brands to South Africa. It's already earmarked specific locations in shopping centres in affluent areas to launch Latin American brand Las Iguanas and French bistro chain Cafe Rouge. The restaurant group says this will help create two streams of revenue - from corporate store sales as well as distribution centre sales.
In the meantime, it continues to capitalise on increasing demand for homegrown brand Chesanyama in the middle to upper LSM groups in South Africa. Although the number of stores across the country and in neighbouring states has decreased to 141 outlets, system-wide sales came in at R295 million last year, with an increase in average stores sales of 5.2% and an increase in average spend per transaction at store level of 6.8%. It says Chesanyama now services more than 2 million customers a month.
Its shares ended trade unchanged at 52c yesterday.
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