Cooks widens loss, revenue falls in 2016 ahead of Chinese JV, capital raising

Cooks Global Foods, which owns the master franchise rights for the Esquires Coffee chain outside of New Zealand and Australia, posted a wider net loss and lower revenue in 2016 as it wrote down the value of its Chinese assets.

Sales fell 13.2 percent to $5.3 million in the year to March 31, 2017, while the net loss grew to $12.2 million from $7.9 million a year earlier. Most of the revenue decline was due to negative currency conversions from its operations in the UK and Ireland as their currencies dropped post-Brexit, it said, while the wider net loss reflected $4.5 million in non-cash writedowns.

Cooks' chairman Keith Jackson said he wants shareholder approval to commit $10 million of new equity to the company, and will launch a share purchase plan in early July to "reduce debt, provide capital sufficient to fund future growth and provide the back-office infrastructure necessary to support that growth." The company issued 3.9 million shares in 2016, bringing the total on issue to 416.6 million shares.

The company wrote down the value of its Chinese coffee store operations by $4 million ahead of its expected sale into a new joint venture in China, and wrote down the carrying value of the Progressive Processors supply business by $450,000 after it was sold. In exchange for its Chinese assets, which includes 26 stores, Cooks gets 30 percent of the company which will own the Esquires brand in China, Hong Kong, Macau and Taiwan.

Revenue from its operations in the UK and Irish markets grew in local currency terms but the gains were erased by falls in the pound and the euro following the Brexit vote last June, Jackson said. After conversions, sales from Britain decreased 13 percent to $1.5 million, compared to a 22 percent gain in local currency. The company now has 29 stores open in the UK, four more than a year earlier. Irish revenue rose 12.5 percent to $668,000, behind the 15 percent gain on a local currency basis.

The company also has 25 outlets in the Middle East, four more than in 2016, where it said it continues to face a challenging trading environment as falling oil prices have weighed on disposable incomes, particularly in the UAE. Its combined revenue from the Middle East, South East Asia and Canada dropped 21 percent to $2.5 million in the year.

The shares last traded at 6.9 cents, and have declined 23 percent this year.


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