Cooks doubles one half loss, seeks equity to fund Chinese growth
Cooks Global Foods, which owns the master franchise rights for the Esquires Coffee chain outside New Zealand and Australia, doubled its first-half loss and says it's in negotiations with its Chinese shareholders about raising equity to fund growth.
Net loss widened to $3.8 million, or 92c a share, in the six months to September 30, from $1.6 million, or 46c a share, a year earlier, the NZAX-listed company said. Revenue rose 16.4% to $5.3 million, driven by growth from Chinese franchising and retail revenues in the first fully-adjusted six-month contribution after acquiring Esquires China in 2015.
Cooks said the wider loss reflected a foreign exchange loss of $500,000, its investment in infrastructure and its costs following the Chinese acquisition. Last month, the company said it was seeking to raise up to $10 million through a convertible notes issue to fund its growth in China and for working capital.
It said it's "in the advanced stage of negotiations" with shareholders Jiajiayue Group, which owns 25% of Cooks, and Yunnan Metropolitan Construction Investment Group, which holds 13%, to raise new equity to "fund the continuing growth of the Esquires Coffee network." The proposals have to be approved by the boards of the two companies, the Chinese government, and Cooks shareholders.
Gearing rose to 48% in the first half, from 19% at March 31. In July, shareholders Jiajiayue and Keith Jackson, Cooks' executive chairman, agreed to a $2 million loan to give the company funding certainty.
Cooks had 25 Esquires stores in China as of Sept. 30, having closed four and opened three in the country since March. In total, it has 90 outlets across China, the UK, Ireland, the Middle East, Canada and Indonesia, up from 86 as of March 31.
Revenue from the UK dropped 5.8% to $1.3 million in the first half, while in Ireland it fell 15.7% to $359,000. In China, it jumped to $2.5 million from $344,000.
The shares last traded at 9c, and have dropped 25% this year.