TIDMGBR
RNS Number : 3059D
Global Brands S.A.
21 March 2011
This announcement replaces announcement RNS Number 2700D.
This announcement includes 4 tables in the Chief Executive's
Report which had been omitted from the previous release as well as
correcting the date below.
21 March 2011
Global Brands S.A. ("Global Brands" or the "Company")
Audited Final Results for the 12 months ended 31 December
2010
Global Brands S.A., the master franchise owner for Domino's
Pizza in Switzerland, Luxembourg and Liechtenstein, today reports
its audited final results for the 12 months ended 31 December
2010.
Financial highlights:
-- Sales increased by 17.0% to CHF 13.8m (2009: CHF 11.8m)
-- Like-for-like sales increased by 18.2%
-- Gross profit increased by 13.9% to CHF 10.0m (2009: CHF
8.8m)
-- Net loss of CHF 1.7m (2009: CHF 3.0m) following a first half
loss of CHF1.5m
-- Record sales quarter in last quarter with sales of CHF
3.8m
-- Recorded first positive quarterly EBITDA in quarter since
2005
-- Raised CHF 2.5m through issuing new shares
Operational highlights:
-- Revenues underpinned by:
-- 21.3% growth in order counts
-- Increased investment in marketing of more than 8% of
sales
-- Stringent cost controls implemented across food and labour
lines with an overall increase in gross profit to CHF10.0m and an
improvement in net loss of CHF1.7m, following a first half loss of
CHF1.5m
-- Overheads reduced by CHF 370k to CHF 2.3m (2009: CHF2.6m)
-- Acquired Pagonia Holding AG, owner of the Pizza Taxi brand
with four sub-franchise stores in Switzerland - Board view
sub-franchising as key to Group future growth
Current trading:
-- Continued positive like-for-like improvement in sales
-- January sales of 1.29m CHF (second best month on record) up
15.2% on a like-for-like basis
-- February sales up 6.4% on a like-for-like basis; growth
impacted by very mild weather conditions
-- Continued focus on organic and acquisition growth
opportunities, through both geographic expansion and by adding
sub-franchisees
Commenting on the results Chief Executive Officer, Bruce
Vandenberg, said:
"I am delighted to report an excellent set of results. The
business has now firmly turned a corner with record sales weeks,
months and quarters all contributing to 17% sales growth to CHF
13.8m (2009: CHF 11.8m). We also recorded our first positive EBITDA
quarter since 2005 and kicked started our sub-franchising program
with the Pagonia Holding AG acquisition.
Our focus on operational excellence is producing results with
the reduction of key cost lines, including food, labour and
overhead. The reduction in the net loss to CHF1.7m (2009: CHF3.0m)
given the first half losses of CHF 1.5m is a testament to the
Company's commitment to cost control.
We have made an excellent start to trading in 2011 with January
being our second best trading month on record. Sales growth in
February was softer at 6.4% on a like-for-like basis, however March
is trading higher. Whilst we are up against strong comparable
figures from last year we remain confident in delivering sales
growth this year.
Sub-franchising will be our key driver for store growth and we
expect to add a minimum of 6 sub-franchise stores to the business
during 2011.
Finally, I would like to thank our key partners, suppliers,
employees and shareholders for their continued dedication and
commitment."
Global Brands S.A.
Simon Bentley, Chairman Tel: (0) 20 7317 8022
www.globalbrands.ch
Libertas Capital Tel: (0) 20 7569 9650
Thilo Hoffmann www.libertascapitalpartners.com
Alexander David Securities Ltd
Bill Sharp Tel: (0) 20 7448 9820
Fiona Kinghorn Tel: (0) 20 7448 9832
www.ad-securities.com
Financial Dynamics
Jonathon Brill Tel: (0) 20 7831 3113
Caroline Stewart www.fd.com
Notes to Editors:
Global Brands is a public company incorporated under the laws of
Luxembourg and established in 1999. The company has been admitted
to trading on the AIM of the London Stock Exchange since 2005.
The Company is the owner and operator of the exclusive master
franchise of Domino's Pizza in Switzerland, Luxembourg and
Liechtenstein. Domino's Pizza is the world's leading pizza delivery
brand, with over 9,200 stores in 65 markets.
Global Brands SA's stated strategy is to add additional
international brands to its portfolio.
CHAIRMAN'S STATEMENT
I am pleased to report on a year of significant operational
achievement.
The strong improvement in our results reflects healthy
like-for-like growth in sales and a, management influenced,
reduction in our operational costs.
Looking forward, we expect growth from the development of our
sub-franchise operations following the acquisition of Pagonia
Holdings AG this year. We are also looking at an involvement in
other territories for Domino's Pizza and taking on additional
brands in Switzerland.
Corporately, it has been an eventful year. Funds have been
raised during the year through new equity placings and we continued
to have the valuable support of our largest shareholder, NobleRock
Capital. The unsecured convertible loan advanced by Noble Rock
Capital was converted into equity on 31 December 2010, further
strengthening our balance sheet.
Our progress this year could not have been achieved without the
hard work and commitment from our executive team from store to
Boardroom. We are now in a position to capitalise on the base that
has been established, through great product, excellent service and
innovative marketing.
We have had considerable challenges to face over the last two
difficult years but we have turned the corner and I am confident
that Global Brands is now well placed for the future.
Simon Bentley Non Executive Chairman
18 March 2011
CHIEF EXECUTIVE OFFICER'S REVIEW
1. Overview
I am delighted to report a strong improvement in our results for
2010, both in terms of significant growth in sales as well as
reduced operating costs. This performance was a result of the
ongoing dedication, commitment and professionalism of our key
partners, suppliers, employees and shareholders, to whom we are
extremely grateful.
The Company set four new sales records during the year. We saw
record monthly sales in May 2010 (CHF1.26m), October 2010 (CHF
1.28m) and December 2010 (CHF 1.29m). The Company also recorded a
record sales quarter in the fourth quarter with sales at CHF 3.8m
(2009: CHF 3.2m). Sales for the year increased by 17.1% to CHF
13.79m (2009: CHF 11.78m) and like-for-like sales grew by 18.2%.
Crucially, following the implementation of stringent cost controls
over the summer, the Company recorded its first EBITDA quarterly
profit since 2005 in the fourth quarter of 2010.
When I wrote to shareholders last year, I expressed my
confidence that the Company had turned a corner. The 2010 trading
results confirm this turnaround. The strategies that were put in
place last year have all delivered and I am pleased to be able to
share the detail with you in this report.
As we look forward, further enhancements to shareholder value
will be delivered through growth. The Pagonia Holding AG
acquisition has provided the catalyst for the implementation of our
sub-franchising strategy. Whilst we are looking for further sales
growth from our 12 own stores, I expect sub-franchising to be our
primary growth engine in 2011. I am confident that we will add at
least 6 new sub-franchise stores during 2011. This is well on our
way to achieving our target of 50 stores by the end of 2014. We
will also continue to explore opportunities for geographic
diversification for Domino's Pizza as well as developing additional
quick service food brands in Switzerland.
2. Sales Growth
Healthy sales growth is an indicator of a healthy business.
Growing top line sales has been a key part of our focus since I
took charge of the Company. Sales in 2009 versus 2008 were
effectively flat and failed to reflect the potential of the
business. In 2010, we focused on increasing sales and brand
awareness as quickly as possible. In order to do so, we invested
heavily in marketing and team training during the first half of the
year and then followed that through with an emphasis on operational
excellence and a commitment to customer service.
As a result, we saw substantial growth in like-for-like year on
year sales even though we began to run up against tougher
comparables in the fourth quarter of 2010. This is highlighted in
the table below.
Like-for-Like Sales Growth - 2010 versus 2009
CHF ('000) Q1 Q2 Q3 Q4 Total
------------- ------- ------- ------ ------ -------
West 2,037 2,215 2,029 2,361 8,641
East 1,126 1,179 1,126 1,264 4,696
------------- ------- ------- ------ ------ -------
2010 3,163 3,394 3,155 3,625 13,337
------------- ------- ------- ------ ------ -------
West 1,884 1,758 1,609 2,113 7,363
East 965 903 871 1,163 3,901
------------- ------- ------- ------ ------ -------
2009 2,849 2,661 2,480 3,276 11,265
------------- ------- ------ ------ -------
West 8% 26% 26% 12% 17%
East 17% 31% 29% 9% 20%
------------- ------- ------- ------ ------ -------
% growth 11% 28% 27% 11% 18%
------------- ------- ------- ------ ------ -------
One of the keys to success with Domino's Pizza is getting your
customers to accept its value equation; the combination of price,
quality and service.
As outlined last year, we changed our pricing policy, and now
offer a competitively priced product. We are addressing the second
two elements by constantly striving for improvements in both
quality and service and continuously measuring and monitoring these
key performance indicators.
The clearest evidence that customers accept the value equation
is repeat purchase and order count growth. Order count growth was
strongly positive on 2009. Essentially, more customers are ordering
pizzas from us, either through repeat purchase or an increase in
our carryout business. Bearing in mind that we only deliver to a
finite number of customers in a defined delivery area, I am very
pleased with these results.
The table below shows the positive order count growth
experienced throughout 2010 and the very positive response to the
lower-price strategy in the East region.
Order Count Growth - 2010 versus 2009 (as a
percentage)
Q1 Q2 Q3 Q4 Total
-------- -------- -------- ------- ------- -------
West 9.69% 32.58% 28.86% 16.34% 14.30%
East 32.41% 57.03% 51.02% 33.15% 42.80%
-------- -------- -------- ------- ------- -------
Total 17.99% 41.79% 37.69% 22.93% 21.30%
-------- -------- -------- ------- ------- -------
The final component in reviewing sales growth is the average
ticket size. When order counts are increasing, it is important that
this growth is not achieved at the expense of average ticket size.
We are conscious that the average ticket size in the East of
Switzerland dropped due to the price reduction implemented in 2009.
I am pleased to report that in 2010, the average ticket recovered
in the East and remained relatively stable in the West.
The table below indicates the progression of average ticket over
the last eight quarters.
Average Ticket Progression - CHF - 2009 and 2010
-----------------------------------------------------------------------
2009 2010
------- ------------------------------ ------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
------- ------ ------ ------ ------ ------ ------ ------ ------
West 35.59 35.83 34.19 35.06 35.58 34.43 34.03 35.78
East 32.22 30.88 28.54 30.03 28.65 27.44 27.00 29.55
------- ------ ------ ------ ------ ------ ------ ------ ------
Total 34.15 33.70 31.83 32.99 32.43 31.01 30.52 32.66
------- ------ ------ ------ ------ ------ ------ ------ ------
3. Marketing
Our brand recognition goes from strength to strength. During the
year we implemented a number of key changes to the product, the
most fundamental of which was the switch to thin crust pizzas as
standard. This was done as a result of overwhelming feedback to
market research. Furthermore, in a move to position the Domino's
Pizza brand as more authentic Italian cuisine rather than
thick-crust American style pizzas, we introduced the "Ti Amo"
device to append the Domino's brand and revamped the menu to
include new Italian style pizzas, desserts and drinks.
Menu flyer distribution remains our most effective marketing
tool and we continue to invest in consistently distributing the
latest menu flyer to customers in the store delivery areas.
Promotional activity was also increased during the year and we
ran a number of promotions focused on getting customers to
re-engage with the brand and sample the new style pizzas, all of
which were well received.
Major promotional activities included a public transport
promotion in the Zurich city area. Customers that collected a
voucher from dispensers placed within trams and buses were able to
buy heavily discounted pizzas if they collected them from the
stores. Due to its success, we will be repeating the promotional
method in both Zurich and Geneva this year.
Online marketing remains a key area of focus for us and we
continue to improve the consumer experience. We launched a Facebook
page during the year and continue to implement strategies for
search engine optimization and advertising on-line.
4. Operational Excellence
Having focused on driving sales growth during the first half of
the year, our focus then shifted to operational excellence and cost
management. There are three key cost components in our business;
food cost, direct labour cost and overhead.
Crucially, both food and labour costs, as a percentage of sales,
reduced substantially during the second half of the year. These
were key to the Company producing its first reported quarterly
EBITDA profit in the fourth quarter.
The table below shows the progression of food and direct labour
cost as a percentage of sales across the year.
Food and Labour Cost Percentage Progression
- 2010
-----------------------------------------------------
Q1 Q2 Q3 Q4
------------ --------- -------- -------- --------
West 22% 25% 26% 22%
East 48% 47% 46% 40%
------------ --------- -------- -------- --------
Food costs rose in Q2 and Q3 due to campaigns run to reactivate
the brand with takeaway deals and BOGOF (buy-one, get-one free)
promotions.
Our operational excellence program focuses on continually
measuring food cost, labour cost and out the door (OTD) times. We
also measure other key indicators relating to the appearance and
organisation of each store. OTD times improved during the year,
with average time to dispatch an order being reduced by circa 2
minutes to just over 15 minutes. Further improvements in speed of
order dispatch are targeted for 2011, underlining the "30 minute"
guarantee for pizza delivery either by telephone or online
order.
Going forward, our focus on operational excellence continues. We
are driven by attention to detail and a desire to constantly
optimise the performance of our people and our stores. We continue
to invest in training and the adoption of best practice principles
learnt from Domino's Pizza operators worldwide.
5. Sub-franchising
The Board believes that sub-franchising is the key to the
Company's future growth.
Originally, the Board had considered growing the number of own
stores alongside the sub-franchisee stores. Having undertaken a
detailed analysis, including an assessment of other Domino's Pizza
markets, the Board has concluded that the sub-franchisee stores
offer potentially better returns than own stores and are far less
capital intensive. The Board will therefore consider further new
corporate stores on an opportunistic basis. In order to maintain
control over the sub-franchisees, where possible, the company will
try to secure the leases.
We believe that Switzerland as a market will support 50 Domino's
Pizza stores and it is our intention to grow our store count from
the current 16, including franchisees, to our target of 50 by the
end of 2014. In order to achieve our targets, we will have to
achieve higher annual store growth rates than ever seen in the
business. I am confident that the Company now has the requisite
operating platform to deliver this growth.
We have an experienced and well organised team and we have
significantly improved the performance of our corporate owned
stores. It is now time to push on with growth through
sub-franchising.
We started this process at the end of 2010 with the acquisition
of Pagonia Holding AG, the owners and operators of the Pizza Taxi
brand in Switzerland. As a result, we have our first four
sub-franchisees and will soon, following the conversion to the
Domino's Pizza brand, have our first Domino's Pizza sub-franchise
stores.
The deal provided a catalyst in ensuring that the business was
ready for operations as a franchisor. The acquisition of these
sub-franchisees, rather than incremental growth on a store-by-store
basis, has ensured that we are ready to support multiple
sub-franchisees in a much shorter time frame than would have
otherwise been the case. We are now operationally prepared to add
additional franchisees at a rapid rate.
6. Diversification
It has been a goal of the Board to diversify our operations for
some time. However, operational stability and growth within the
core business were always prerequisites. During 2010, we reported
that we had reached an agreement to secure a sushi franchise for
Switzerland and an option on Austria. It is unfortunate that we
were unable to reach an agreement with YO! sushi. However, we
remain focused on brand diversification in Switzerland and continue
to discuss opportunities with a number of brands that we feel would
be appropriate to the market. Switzerland is a complex operating
environment and we remain convinced that the Company offers a
unique set of skills and experience in launching franchised food
brands in the territory.
The other area of potential for diversification is geographic
diversification with the Domino's Pizza brand and we continue to
evaluate the potential of this strategy.
7. Financial Review
The table below summarises the Company's performance for the
year 2010:
31 December
2010 2009
Increase
CHF '000's CHF '000's (decrease)
Turnover 13,785 11,780 17.02%
Gross Profit 10,016 8,790 13.95%
Staff Costs (7,653) (7,298) 4.86%
Administration Expenses (3,964) (3,548) 11.72%
----------- -----------
EBITDA (1,602) (2,057)
----------- -----------
Net loss for the year (1,667) (3,013)
=========== ===========
EPS / (loss) per share (0.01) (0.08)
Shareholders' equity 2,009 (45)
The Company opened one new store during the year in Hongg and
there were no store closures. At the end of the year the Company
had 12 stores in operation, all of which are Company owned. The
stores are located in the cities of Zurich, Geneva, Basel and
Lausanne and in important towns, Neuchatel and Winterthur. The
combined performance of these stores was operationally
profitable.
Sales increased over last year by CHF 2m to CHF 13.79m. This was
the combined result of significant investment in marketing,
improved store operations and a dedication and commitment to
service. We saw record monthly sales in May 2010 (CHF1.26m),
October 2010 (CHF 1.28m) and December 2010 (CHF 1.29m). The Company
also recorded a record sales quarter in the fourth quarter with
sales at CHF 3.8m. Sales for the year increased by 17.1% to CHF
13.79m (2009: CHF 11.78m) and like-for-like sales grew by
18.2%.
Gross Profit increased by 13.9% to CHF 10m (2009: CHF 8.8m). The
reduction in gross margin to 72.7% (2009: 74.6%) was largely due to
increased food costs in the second and third quarters before the
new operational excellence programme took effect. As noted earlier,
food costs were reduced from 26% of sales in the third quarter to
22% of sales in the final quarter.
By contrast, staff costs only increased by 4.9% to CHF 7.65m
(2009: CHF 7.29m). The increase was largely attributable to:
-- the increase in direct labour costs which rose as a result in
the increase in turnover. As a percentage of turnover, direct
labour costs improved to 45% (2009: 51%) resulting in a cost of CHF
6.22m (2009: CHF 5.96m).
-- Board fees and cost were reduced to CHF 241k (2009: CHF 418k)
and other staff costs were reduced to CHF 15k (2009: CHF 117k).
Administrative expenses increased by 11.47% to CHF 3.92m (2009:
CHF 3.55m). This increase was partly due to increased royalty
payments to Domino's Pizza as these are directly linked to sales:
the increase also however reflects a 256% increase in marketing
spend excluding royalties (2010: CHF 1.1m, 2009: CHF 309k) as well
as an increase of around CHF 50k in IT costs. These increases were
partially offset by a significant reduction in legal costs (minus
CHF 360k) and audit costs (minus CHF 50k). I am pleased to report a
reduction in other administrative expenses to CHF 2.25m (2009: CHF
2.62m).
The reduction in the EBITDA loss for the first half of the year
from CHF 1.01m to CHF 0.59m in the second half was principally due
to the excellent cost controls implemented in the second half of
the year. This impacted particularly strongly in the fourth quarter
when the Company recorded its first positive quarterly EBITDA since
2005.
The resulting EBITDA loss for the year was CHF 1.56m (2009: CHF
2.06m). After taking into account depreciation and amortization,
financial charges and income and a deferred tax asset credit of CHF
443k, the final loss for the year was CHF 1.67m (2009: 3.01m). This
translates into an earnings per share loss of CHF 0.01 (2009: CHF
0.08).
The Company's balance sheet has improved even more markedly. As
at 31 December 2010, the Company had cash resources of CHF 1.1m
(2009: CHF 877k). Current liabilities were reduced to CHF 3.5m
(2009: 4.1m). Shareholders' equity improved from a negative CHF 45k
in 2009 to a positive CHF 2.01m in 2010.
8. Corporate Developments:
Share Placing:
In February 2010, the Company raised funds totaling CHF 625,209
(GBP 390,000) gross though a placing of 21,666,667 new shares at a
price of GBP 0.018 per share.
On 9 November 2010, the Company raised a further CHF1.9 million
(GBP 1,236,000) through a placing of 45 million new shares at a
price of GBP 0.0275 per share.
NobleRock Capital Convertible Loan:
As set out in last year's report, NobleRock Capital agreed to
provide the Company with a convertible loan facility of CHF 1
million at an interest rate of 7% per annum and a conversion price
of GBP 0.017 per share.
During the year the loan was drawn down in various tranches and
the Company announced on 31 December 2010 that the Board had
resolved to convert the loan early together with the accrued
interest. The total amount outstanding at the point of conversion
was CHF 1,024,938.90.
Initially the loan facility was due to convert on 30 June 2011,
however the Board believed it beneficial to convert the loan on 31
December 2010 in order to strengthen the Company's balance sheet
ahead of the financial year-end and to eliminate further interest
payments.
40,979,469 new shares were issued to NobleRock Capital
representing CHF 1,024,938.90 (GBP696,650.97) being the principal
and accrued interest of the loan.
The total number of shares in issue following the loan
conversion and the issue of shares relating to the Pagonia Holding
AG acquisition is 202,918,941.
NobleRock Capital owns 84,727,291 shares in the Company,
representing 41.75% of the issued share capital of the Company.
Pagonia Holding AG Acquisition:
On 31 December 2010 the Company completed the acquisition of the
entire issued share capital of Pagonia Holding AG and its
subsidiaries with effect from January 1(st) 2011. The total
consideration agreed was CHF 940,000 divided into cash and shares
of CHF 611,000 in cash and the issue of 7,976,000 new ordinary
shares in the Company at a price of GBP0.0275. On 31 December 2010,
CHF 488,800 was paid in cash and 6,380,800 new shares were issued
to the vendors as part consideration. A final payment of 20% of the
consideration was due to be paid on 28 February 2011. (See Post
Balance Sheet Events below.)
Swiss Corporate Structure:
The acquisition of Pagonia Holding AG means that the Company now
owns four Swiss companies. It is the Company's intention to install
a Swiss corporate structure for its Swiss business since many
suppliers would prefer to deal with a Swiss partner. Pagonia
Holding AG has therefore been renamed Global Brands Switzerland AG
and will be the Swiss holding company for the Company's Swiss
activities. One of the other companies has been renamed Domino's
Pizza Switzerland AG and, following the completion of legal and tax
compliance work, the Company plans to transfer its operative
business in Switzerland (Domino's Pizza) from its Swiss branch to
Domino's Pizza Switzerland AG. It is currently expected that this
transfer will become effective on 1 July 2011.
9. Post Balance Sheet Events:
The amended terms of the Pagonia Holding AG acquisition
announced on 31 December 2010 required the vendors to deliver a new
suitable location for the Leistal store by 28 February 2011. In the
event that the vendors complied with this condition, the balance of
the consideration would have been paid to them as:
-- CHF 122,200 in cash
-- 1,595,200 shares
As the vendors failed to secure a suitable location by the
deadline, the consideration paid for the acquisition is the cash
and shares paid and issued on 31 December 2010.
10. Current Trading and Outlook:
I am very pleased to report that we have carried last year's
momentum into 2011. Despite being up against tougher comparables
sales figures, both January and February were up on last year.
January's figures showed sales tracking 20.8% ahead of last year
and 15.2% up on a like-for-like basis. February was not quite as
strong because much of the month was effected by
uncharacteristically good weather. Nevertheless, sales were up
against last year by 11.7% and 6.4% on a like-for-like basis.
Looking ahead, we will continue to concentrate on reducing
operational costs and ensuring our key performance metrics meet our
targets. Our primary growth focus for 2011 will be on
sub-franchising. We are targeting to add a minimum of six new
sub-franchise stores by the end of the year. This will take our
total store count to 22, well on our way to our goal of 50 stores
by the end of 2014.
We still believe that sushi represents a great opportunity in
Switzerland and we will continue our discussions with potential
partners regarding sushi as well as other brands suitable for the
Swiss market. Switzerland is a country of 7.5 million people and
some major international cities such as Geneva, Basel and Zurich,
in all of which we currently operate. Switzerland has a strong
currency and a robust financial market. The Global Brands
operational management team now has significant experience and
capability in Switzerland with its three main languages, twenty-six
"cantons" and strong cultural influences from Germany, France and
Italy. We are very confident of our ability to create significant
value, not only with Domino's Pizza, but also with new franchises
or joint ventures for other 'global brands' in Switzerland and
other European countries. We will also continue to develop
opportunities to operate the Domino's Pizza brand in other
markets.
I look forward to updating you again on our progress throughout
the course of the year.
Finally, on behalf of the entire Board, I would like to express
our sincere thanks and appreciation to all of our employees and
suppliers, our franchisor Domino's Pizza and our shareholders for
their continuing dedication, support and commitment.
Bruce Vandenberg Chief Executive Officer
18 March 2011
DIRECTORS' REPORT
The Directors are pleased to submit their annual management
report and audited financial statements for the year ended 31
December 2010.
For the purpose of filing with AIM, financial statements have
been prepared and presented using International Financial Reporting
Standards ("IFRS"). The Company has elected, as allowed under
Luxembourg law to produce only financial statements using IFRS and
these are also available at the registered office and the Registrar
of Commerce and Societies in Luxembourg.
1. Principal activity:
The principal activity of the Company is the sale of Domino's
Pizza products in Switzerland. The Company's registered office is
in Luxembourg but trading was carried out through its main branch
in Zurich. A review of the business is contained in the Chief
Executive's Review.
2. Going concern:
At 31 December 2010 current liabilities, including provisions,
of the Company exceeded its current assets by CHF 1,771K (2009: CHF
2,821K).
As reported, the Company raised fresh capital in February 2010
totaling CHF 625,209 gross though a placing of 21,666,667 new
shares at a price of GBP 0.018 per share.
In April 2010, the Company sold the Renens store for CHF 250k
net of costs.
In May 2010, NobleRock Capital s.a r.l. and the Company agreed a
convertible loan facility for CHF 1 million at an interest rate of
7% per annum with a conversion price of GBP 0.017. This facility
was fully drawn down during the year.
In November 2010, the Company raised further capital totaling
CHF 1,913,204 gross through a placing of 44,945,455 new shares at a
price of GBP 0.0275 per share.
In December 2010, the Company issued a further 47,360,269 new
shares. Of this total 40,979,469 new shares were issued at a price
of GBP 0.017 for the conversion of the NobleRock Capital s.a.r.l
loan plus accrued interest. A further 6,380,800 new shares were
issued at a price of GBP 0.0275 as part payment for the acquisition
of Pagonia Holding AG.
The Company was able to generate a positive cash flow in the
fourth quarter of 2010 and is confident that the positive trend set
in 2010 will continue. This turnaround, together with the careful
management of its creditors, means that the Company should be able
to meet its obligations in the future. On this basis, the directors
consider it is appropriate to draw up financial statements on a
going concern basis for the foreseeable future, and consider that
the Company has sufficient working capital for its present
requirements.
3. Business and financial risk management:
Information on business and financial risk management is given
in note 26 of the accompanying financial statements.
4. Capital investments in the business:
During 2010, CHF 513.6K was invested in new stores, equipment
and vehicles, financed partly by finance lease contracts. A new
store was opened in Hongg in May 2010 and is performing in line
with expectations.
Details of intangible and tangible assets are set out in notes
13 and 14 of these financial statements.
5. Deferred tax asset:
The Directors have decided to carry forward deferred tax assets
of CHF 1,074K representing 21% of the pre tax losses for 2009 and
2010. The net effect is a credit to the 2010 profit and loss
account of CHF 443K.
6. Post year-end events:
Other than as noted in the Chief Executive's Review, there are
no material events since the year-end that would affect the
Company's financial position as established at 31 December 2010.
The Board believes in the strength of the Domino's Pizza brand and
the soundness of the business model. On this basis, in close
cooperation with NobleRock Capital s.a r.l., we continue to seek
and explore opportunities to develop new stores and
sub-franchisees.
7. Directors
There were no changes to the Board of Directors during 2010.
All of the Company's directors participated in the issue of new
shares in November 2010. Robert Avondo purchased 3,636,364 shares,
Simon Bentley purchased 363,636 shares and Vancor Limited, a
company beneficially owned by Bruce Vandenberg, purchased 1,818,182
shares.
8. Directors Remuneration Report
This report meets the relevant requirements of the Listing Rules
of the Financial Services Authority and describes how the Board has
applied the Principles of Good Governance relating to Directors'
Remuneration.
Remuneration policy
Executive remuneration packages are prudently designed to
attract, motivate and retain Directors of the necessary calibre and
to reward them for enhancing value to shareholders. The performance
measurement of the Executive Directors and key members of senior
management and the determination of their annual remuneration
package is undertaken by the Remuneration Committee. The Board
within limits set out in the Articles of Association determines the
remuneration of the Non-executive Directors. Executive Directors
are entitled to accept appointments outside the Company providing
the Board's permission is sought.
Non-executive Directors' terms of engagement
The Non-executive Directors have specific terms of engagement.
The Board determines their remuneration. In the event that a
Non-executive undertakes additional assignments for the Company,
the Company in respect of each assignment will agree the
Non-executive's fee.
Aggregate Directors' remuneration
Salary and Bonus Pension 2010 Total 2009 Total
Fees
Bruce Vandenberg CHF 67,020 CHF 0 CHF 0 CHF 67,020 CHF 55,110
Simon Bentley CHF 106,456 CHF 0 CHF 0 CHF 106,456 CHF 100,112
Roberto Avondo CHF 67,020 CHF 0 CHF 0 CHF 67,020 CHF 63,357
Yair Hasson CHF 0 CHF 0 CHF 0 CHF 0 CHF 77,040
Amir Hasson CHF 0 CHF 0 CHF 0 CHF 0 CHF 63,770
No options were awarded to Directors who served during the
year.
9. Share option scheme
Under the historic Share Option Plan approved in 2006, the
Company may grant options for up to 10% of its issued share capital
from time to time. The Company had issued options exercisable into
new ordinary shares to former directors, which expire in the years
2015-2016, as follows:
Number of shares under option
Exercise Price (pence) 2010 2009
38.88 1,849,918 1,849,918
24.17 229,467 229,467
18.92 101,871 101,871
No share options have been exercised.
10. Shareholders
NobleRock Capital s.a r.l, a Luxembourg company, currently holds
41.75% of the Company's issued shares. The ultimate beneficial
owner of NobleRock Capital s.a r.l is Mr. Alexandre Gaydamak.
As of 15 March 2011 the following persons and companies had an
interest of 3% or more in the issued share capital of the
Company.
% of issued share capital
NobleRock Capital s.a r.l. 41.75%
SBS Nominees Ltd 12.86%
Barclayshare Nominees Ltd 4.85%
TD Waterhouse Nominees (Europe) Ltd 3.47%
Lynchwood Nominees Ltd 3.14%
11. Corporate Governance
The Directors acknowledge their responsibility for good
corporate governance as set out in the Combined Code and support
its main provisions in so far as they are appropriate to a company
of the size of Global Brands at its stage of development.
12. Directors
The Directors recognise their duty of due care in the management
and administration of the Company. The Board comprised three
Directors as at 31 December 2010 and this is still the case.
The role of the Board is to determine the Company's strategy and
monitor performance and achievement of its business objectives. The
Board meets at least four times a year for these purposes and holds
additional meetings when necessary to transact other business. The
Board receives reports for consideration on all significant
strategic and operational matters.
The independent non-executive Directors are considered by the
Board to be independent of Management and free from any business or
other relationship, which could materially interfere with the
exercise of their independent judgment. Directors have the facility
to take external independent advice in furtherance of their duties,
at the Company's expense.
The Board delegates certain of its responsibilities to the Audit
and Remuneration Committees of the Board. These Committees operate
within clearly defined terms of reference.
13. Accountability and Audit
Directors' Responsibilities
The Directors are required to prepare financial statements,
which give a true and fair view of the state of the Company's
financial position as at the end of the period and of the Company's
profit/loss for the year. The Directors have responsibility for
ensuring that proper accounting records are kept which disclose
with reasonable accuracy the financial position of the Company.
They have a duty of care and general responsibility to implement
internal controls to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
Appropriate accounting policies, which follow generally accepted
accounting practices, are set out in the notes to the accounts, and
these have been applied consistently. In addition, reasonable and
prudent judgments and estimates have been used in the preparation
of the financial statements.
Audit Committee and Auditors
The Audit Committee, composed entirely of non-executive
Directors, assists the Board in meeting its responsibilities in
respect of external financial reporting and internal controls. The
Audit Committee also keeps under review the scope and results of
the external audit. It also considers the cost effectiveness,
independence and objectivity of the auditors taking account of any
non-audit services provided by them.
Remuneration Committee
The Remuneration Committee is composed entirely of non-executive
Directors. It meets at least twice a year and has a primary
responsibility to review the performance of executive directors and
senior employees and set the scale and structure of their
remuneration having due regard to the interests of
shareholders.
Internal Controls
The Directors are responsible for maintaining a sound and
effective system of internal financial and operational controls.
Although no system of internal control can provide absolute
assurance against material misstatement or loss, the Company's
system is designed to provide reasonable assurance that significant
errors and irregularities are identified on a timely basis and
dealt with appropriately.
In carrying out their responsibility, the Directors have put in
place a framework of financial budgetary controls to ensure as far
as possible that ongoing financial performance is monitored in a
timely manner, that corrective action is taken and that risk is
identified as early as practically possible.
The Board, subject to delegated authority, reviews capital
investment, sales and purchases, additional borrowing facilities,
guarantees and insurance arrangements.
14. Corporate Social Responsibility
The Company is committed to delivering the highest standards of
product and service to its customers. We make every effort to be an
equal opportunities employer and are committed to investing in our
team members through market leading, training and development and
health and safety.
15. Auditors
Following the acquisition of Pagonia Holding AG and its
subsidiaries, the Company now owns four Swiss companies. The
Company proposes to restructure its organization and transfer its
current operating business from its Swiss branch to a Swiss
operating company. In connection with this restructuring the Board
is currently considering whether it is still appropriate to have an
auditor based in Luxembourg. A proposal with regard to the
appointment of an auditor will be made at the forthcoming Annual
Meeting. The report of PKF, the current auditors, on these
financial statements is included in this Annual Report.
16. Annual General Meeting
In accordance with article 17.1 of the Company's articles of
incorporation, the Annual General Meeting is to be held on the 1st
working day in June each year, this year being Wednesday, 1st June
2011. A convening notice to shareholders will be sent to registered
shareholders at least two weeks before the meeting.
On behalf of the Board
Bruce Vandenberg
18 March 2011
STATEMENT OF INCOME
For the year ended 31 December 2010
(Expressed in Swiss Francs) 2010 2009
Notes CHF CHF
Revenue from sales 6 13,785,403 11,779,'934
Cost of sales (3,769,510) (2,990,154)
------------ ------------
Gross profit 10'015'893 8,789,780
Staff costs 8 (7,653,886) (7,298,365)
Administrative expenses 9 (3,919,887) (3,548,430)
------------ ------------
Loss from operations before
depreciation & amortisation (1,557,880) (2,057,015)
Depreciation and amortisation 13 & 14 (497,081) (1,002,691)
------------ ------------
Loss from operations before financial
result (2,054,961) (3,059,706)
Interest and financial income 10 2,969 63,268
Interest and financial charges 11 (58,700) (7,561)
------------ ------------
Loss on ordinary activities (2,110,692) (3.003,999)
Deferred tax asset credit / (charge) 17 443,245 (9,974)
------------ ------------
Loss for the year (1,667,447) (3,013,973)
============ ============
Basic earnings / (loss) per share 7 (0.01) (0.08)
Diluted earnings / (loss) per share 7 (0.01) (0.08)
The accompanying notes 1 to 28 form an integral part of these
financial statements.
STATEMENT OF INCOME COMPREHENSIVE INCOME
(Expressed in Swiss Francs) 2010 2009
CHF CHF
Loss for the year (1,667,447) (3,013,973)
Adjustments per IFRS 1 - -
------------ ------------
Total comprehensive loss for the year (1,667,447) (3,013,973)
============ ============
BALANCE SHEET
As at 31 December 2010
(Expressed in Swiss Francs) 2010 2009
Notes CHF CHF
ASSETS
Non-current assets
Intangible assets 13 95,008 98,703
Property, plant and equipment 14 1,675,204 1,895,355
Financial assets 15 185,719 175,474
Deposit re: Acquisition 16 782,647 -
Deferred tax asset 17 1,074,085 630,840
------------ ------------
Total non-current assets 3,812,663 2,800,372
------------ ------------
Current assets
Stocks 18 282,550 276,544
Trade and other receivables 19 274,850 147,790
Cash at banks and in hand 1,141,950 877,011
------------ ------------
Total current assets 1,699,350 1,301,345
------------ ------------
Total assets 5,512,013 4,101,717
============ ============
EQUITY AND LIABILITIES
Capital and reserves
Called up share capital 20 4,058,379 1,778,931
Share premium 20 3,950,824 2,508,760
Accumulated losses (6,000,145) (4,332,697)
------------ ------------
Shareholders' equity 2,009,058 (45,006)
------------ ------------
Non-current liabilities
Obligations under finance leases 21 32,412 24,366
------------ ------------
Total non-current liabilities 32,412 24,366
------------ ------------
Current liabilities
Trade and other payables 22 2,760,187 3,338,183
Provisions for other liabilities and
charges 23 638,584 750,000
Obligations under finance leases 21 71,772 34,174
------------ ------------
Total current liabilities 3,470,543 4,122,357
------------ ------------
Total equity and liabilities 5,512,013 4,101,717
============ ============
The accompanying notes 1 to 28 form an integral part of these
financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2010
(Expressed in Swiss Francs) 2010 2009
Notes CHF CHF
OPERATING ACTIVITIES
Net cash flows applied to operations
activities before movements in working
capital 28 (1,577,435) (1,997,439)
Decrease/(increase) in stocks (6,006) (31,190)
Decrease/(increase) in trade and other
receivables (127,060) (34,739)
Increase/(decrease) in creditors and
provisions (689,411) (25,545)
------------ ------------
Net cash flows applied to operations (2,399,912) (2,088,913)
------------ ------------
INVESTING ACTIVITIES
Payments to acquire fixtures, equipment
motor vehicles and software (174,445) (603,317)
Purchase of Subsidiary (782,647) -
Interest received 2,969 1,947
Deposits (made)/ repaid (10,245) 129,363
------------ ------------
Net cash inflows (outflows) from
investing activities (964,369) (472,007)
------------ ------------
FINANCING ACTIVITIES
Funds raised through issuance of shares 3,721,512 1,869,222
Payments under finance lease obligations (53,147) (50,467)
Interest paid (39,146) (5,815)
------------ ------------
Net cash inflows (outflows) from
financing activities 3,629,219 1,812,940
------------ ------------
Increase /(decrease) in cash & cash
equivalents during the year 264,939 (747,981)
============ ============
Cash and cash equivalents:
- balance at beginning of the year 877,011 1,624.992
- balance at end of the year 1,141,950 877,011
------------ ------------
Increase/ (decrease) in cash & cash
equivalents during the year 264,939 (747,981)
============ ============
Cash and cash equivalents are represented
by:
Cash at banks and in hand 1,141,950 877,011
Due to banks - -
------------ ------------
Net cash and cash equivalents at end of
the year 1,141,950 877,011
============ ============
STATEMENT OF MOVEMENTS IN SHAREHOLDERS' EQUITY
Called up Accumulated
share capital Share premium losses Total
(Expressed in
Swiss Francs) CHF CHF CHF CHF
Balance at 31
December 2006 10,128,006 1,959,535 (5,925,178) 6,162,363
Loss for the
year 31
December 2007 - - (2,003,557) (2,003,557)
--------------- -------------- ------------- ------------
Balance at 31
December 2007 10,128,006 1,959,535 (7,928,735) 4,158,806
Loss for the
year 31
December 2008 - - (3,059,061) (3,059,061)
--------------- -------------- ------------- ------------
Balance at 31
December 2008 10,128,006 1,959,535 (10,987,796) 1,099,745
--------------- -------------- ------------- ------------
Rounding
adjustment - - (2) (2)
--------------- -------------- ------------- ------------
Capital
Restructuring
in 2009 (9,669,075) - 9,669,075 -
--------------- -------------- ------------- ------------
Share Issuance
in 2009 1,320,000 549,225 - 1,869,225
--------------- -------------- ------------- ------------
Loss for the
year 31
December 2009 - - (3,013,973) (3,013,973)
Balance at 31
December 2009 1,778,931 2,508,760 (4,332,696) (45,006)
--------------- -------------- ------------- ------------
Share issuance
in 2010 2,279,448 1,442,064 3,721,512
Loss for the
year 31
December 2010 (1,667,447) (1,667,447)
Balance at 31
December 2010 4,058,379 3,950,824 (6,000,144) 2,009,059
--------------- -------------- ------------- ------------
NOTES TO THE FINANCIAL STATEMENTS
1. Statutory information
Global Brands S.A. (the " Company") was incorporated under the
laws of Luxembourg on 6th July 1999 by notary act prepared by
Maitre Alex Weber, notary residing in Luxembourg. The act was
published in the legal gazette, the Memorial C N[deg] 723 of 29th
September 1999. The Company is registered under number B 70673 at
the Register of Commerce and Societies in Luxembourg (Registre de
Commerce et des Societes (R.C.S.)). The registered office is in
Luxembourg. A branch has been opened in Switzerland where it
carries on its principal trading activity.
2. Activities
The Company has acquired the Domino's Pizza master franchise
licences, concessions and rights for Switzerland, Liechtenstein and
Luxembourg. Its current activities consist of the promotion,
manufacture and sale of Domino's pizzas.
3. Directors' responsibility
The Board of Directors approved the annual report and financial
statements drawn up under IFRS on 14th March 2011 and they will be
submitted to shareholders for approval at the annual general
meeting.
The statutory annual accounts for the year ended 31 December
2009 have been approved by shareholders and have been filed at the
R.C.S. in Luxembourg.
4. Basis of preparation
These financial statements have been prepared in accordance with
EU adopted International Financial Reporting Standards ("IFRS")
under the historical cost convention using accounting policies on a
basis consistent with those adopted for the prior year, and on a
going concern basis.
The financial statements are stated in Swiss Francs ('CHF'),
which is the currency of the issued share capital of the Company
and the Company's functional currency.
Comparative figures
In instances where reclassification of amounts has been made,
comparative figures of the previous year have been modified to
provide a comparable basis. These reclassifications have no effect
on the results and net equity.
Going concern
The Company's current liabilities and provisions for charges
exceed its current assets by CHF 1.7 million which indicates that
the Company may not be able to continue as a going concern. In
mitigation the Company has demonstrated over a number of years an
excellent track record of raising funds in the form of new equity
as required. The Company was able to generate a positive cash flow
in the fourth quarter of 2010 and is confident that the positive
trend set in 2010 will continue. This turnaround, together with the
careful management of its creditors, means that the Company will be
able to meet its obligations in the future. Accordingly these
financial statements have been prepared on the basis that the
Company will continue as a going concern for the foreseeable
future. In the event that the turnaround does not continue and the
Company is placed into dissolution, further adjustments would be
required to provide for charges to wind up the Company's affairs
and to restate the value of assets to their net realisable
value.
Use of estimates
Accounting estimates and assumptions are used in the preparation
of these financial statements, notably in respect of depreciation
and amortisation of fixed assets, provisions for bad debts,
valuation of stocks and provisions for charges. These estimates are
based on the Directors' best knowledge of current events and
actions, although actual results may ultimately differ from those
estimates.
5. Summary of significant accounting policies
Changes in accounting policy
IFRS 8 Operating Segments
In the current financial period, the Company has adopted the
requirements of IFRS 8 Operating Segments. IFRS 8 concerns the
presentation and disclosure of segment information in the Company's
financial statements and consequently has not affected the
measurement of the Company's loss, assets or liabilities. IFRS 8
requires segment information to be presented on the same basis as
that used for internal reporting purposes.
IAS 1 Revised Presentation of Financial Statements
The revised standard introduces the statement of comprehensive
income; it presents all items of recognised income and expense,
either in one single statement, or in two linked statements. The
Company has elected to present two statements.
IAS 23 Borrowing Costs (Revised)
The standard has been revised to require capitalisation of
borrowing costs on qualifying assets, which is in line with the
Company's current policy.
IFRS Share-based Payment; Vesting Conditions and Cancellations
(Amendment)
The amendment to IFRS 2 restricts the definition of vesting
conditions to include only service conditions (requiring a
specified period of service to be completed) and performance
conditions (requiring the other party to achieve a personal goal or
contribute to achieving a corporate target). All other features are
not vesting conditions. This amendment to the standard has not had
an impact on the Company and no adjustments are therefore
necessary.
IFRS 7 Financial Instruments: Disclosures (Amendment)
The amendment of IFRS 7 enhances disclosures about fair value
measurement and liquidity risk. IFRS 7 now requires instruments
measured at fair value to be disclosed by the source of the inputs
in determining fair value, using a three-level hierarchy. The
amendment has also enhanced the minimum liquidity disclosures,
specifically requiring the management of liquidity risk to be
considered and disclosure made of a maturity analysis of financial
assets held for managing liquidity risk. The Company holds no
financial instruments and has therefore not needed to make any
adjustments.
Revenue recognition
Sales revenue is the amount receivable by the Company for goods
supplied and services provided after deducting sales taxes and
discounts. Revenue is recognised when goods are delivered and title
has passed.
Interest income is accrued on a time basis by reference to the
principal outstanding and the interest rate applied.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Depreciation is
calculated to write down the cost less estimated residual value of
all property, plant and equipment by equal annual instalments over
their expected useful lives. Land is not depreciated.
The expected useful lives generally applicable are:
-- Freehold buildings : 50 years
-- Fixtures, fittings and stores equipment: 6 to 10 years, or
over the life of the store lease.
-- Furniture and office equipment: 3 to 4 years.
-- Motor vehicles: 3 to 7 years.
Fixtures, fittings and stores equipment are depreciated
initially over the primary life of the lease , normally 5 to 6
years. In the event that leases are renewed and extended,
depreciation is re-calculated over the extended period of the
lease.
Leased assets
Leases are classified as finance leases when the terms of the
lease transfer substantially the economic ownership of the asset to
the lessee. Assets held under finance leases and hire purchase
contracts are capitalised in the balance sheet and depreciated over
their expected useful lives. They are capitalised at their fair
value at the date of acquisition, or if lower, at the present value
of the minimum lease payments. The interest element of leasing
payments representing a constant proportion of the capital balance
outstanding is charged to the profit and loss account over the
period of the lease.
All other leases are regarded as operating leases and the
payments made under them are charged to the profit and loss account
on a straight-line basis over the term of the lease.
Intangible assets
Intangible assets acquired are stated at cost less accumulated
amortisation and impairment losses. Subsequent expenditure on
capitalised intangible assets is capitalised only when it increases
the future economic benefits embodied in the specific asset to
which it relates. All other expenditure is expensed as
incurred.
Amortisation is charged on a straight-line basis over the
estimated useful economic life and charged from the date the asset
is available for use. The useful lives are estimated as
follows:
-- Licences: 15 years, being the period of the operating
franchise license
-- Software: 2 to 3 years
The carrying values are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any
such indication exists, the recoverable amount is estimated. An
impairment loss is recognised whenever the carrying value of the
asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are charged to the income statement.
Financial assets
Financial assets representing guarantee bank deposits are stated
at fair values.
Deferred taxation
Deferred tax payable is provided using the liability method on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial information
tables. The principal temporary differences arise from depreciation
of property, plant and equipment, tax losses carried forward and on
the difference between the fair values of the net assets acquired
and their tax base.
Deferred tax is provided for using the tax rates estimated to
arise when the timing differences reverse and is accounted for to
the extent that it is probable that a liability or asset will
crystallise. Non-provided deferred tax is disclosed as a contingent
liability.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be sufficient and
available against which the existing tax losses can be utilised.
Deferred tax assets are reviewed at each balance sheet date to
determine the expected timing of their realisation and whether
there is impairment in their book carrying value.
Stocks
Stocks are stated at the lower of cost and net realisable value,
after making allowance for obsolete and slow moving items. Cost of
raw materials, finished goods and consumables comprises the
invoiced value of the goods.
Debtors and receivables
Debtors and receivables are stated at their nominal value, less
provision for estimated irrecoverable amounts.
Financial instruments
The Company's financial instruments consist of long term bank
deposits, cash, bank current accounts, short term bank deposits,
trade receivables, other receivables, accrued income, trade
payables, obligations under finance lease contracts, loans, other
accounts payable and accrued liabilities. The fair value of the
financial instruments approximates their carrying values.
Foreign currency
Transactions in foreign currencies are translated at the
prevailing exchange rate ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated at the rates of exchange ruling at the balance sheet
date. Any gain or loss arising from a change in exchange rates
subsequent to the date of the transaction is included as an
exchange gain or loss in the profit and loss account.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, balances with
banks and short term deposits with original maturities of three
months or less. Bank guarantee deposits are considered to be
investing activities; bank borrowings are considered to be
financing activities. The balances represent their fair value.
Trade payables
Trade payables are stated at their carrying amounts.
Borrowings
Loans and bank overdrafts are recorded at the proceeds amount.
Interest and financial charges, including premiums payable on
repayment, are accounted for on an accrual basis and are added to
the amount of the debt.
Interest expense is accrued on a time basis by reference to the
principal outstanding and the interest rate applied.
Pension schemes
The Company makes contributions to the government pension plans.
Contributions are charged to the profit and loss account. The
Company operates a defined contribution pension scheme for its
employees.
New standards and interpretations applied
The IASC and IFRIC have issued standards and interpretations
with an effective date for periods starting on or after the date on
which these financial statements commence. The following applicable
standards and interpretations have been issued, none of which are
anticipated to significantly impact the Company's results or assets
and liabilities and are not expected to require significant
disclosure.
Effective Date
International Financial Reporting Standards (IFRS)
IFRS 1 - First time adoption of IFRS 1 July 2009
IFRS 3 - Business Combinations 1 July 2009
IFRS 9 - Financial Instruments (not yet endorsed by the EU) 1
January 2013
International Accounting Standards (IAS)
IAS 27 - Consolidated and separate financial statements
(Amendments) 1 July 2009
IAS 39 - Financial instruments: Recognition and measurement 1
July 2009
International Financial Reporting Interpretations Committee
(IFRIC)
IFRIC 17 - Distribution of non-cash assets to owners 1 July
2009
IFRIC 18 - Transfer of assets from customers 1 July 2009
These standards will, for the most part, apply to the financial
statements for the period ended 31 December 2010 and have therefore
been applied in the preparation of these financial statements. Any
standards or interpretations which have been issued but which are
not yet affective have not been applied in these financial
statements.
6. Revenues and results
The loss on ordinary activities before taxation is stated after
charging or crediting:
2010 2009
CHF CHF
Depreciation of:
-Property, plant and equipment owned 391,815 883,928
-Property, plant and equipment held under finance leases 77,448 77,159
Amortisation of intangible fixed assets 27,819 41,605
Included in administration expenses are:
- Operating lease rental charges 589,480 656,444
- Auditors' remuneration - audit services 36,697 88,490
Foreign currency (loss) / gain (13,685) 61,320
Segment Information
The Company holds the Master Franchise Agreement for Domino's
Pizza for Switzerland, Luxembourg and Liechtenstein. In the
financial year 2010 sales were only made under the Domino's Pizza
franchise in Switzerland. Management monitors key performance
indicators for its two principal segments, namely east and west
Switzerland. The languages being used, namely French in the west
and Swiss German in the east define these segments. Of the 12
(2009: 11) operating locations in Switzerland as at the end of
2010, 6 (2009: 6) are in the west region and 6 (2009: 5) in the
east region.
2010 2009
CHF'000 East West Un-allocated Total East West Un-allocated Total
-------------- -------- -------- ------------- -------- -------- -------- ------------- --------
Segment
Revenue
Sales to
external
customers 5,091 8,694 - 13,785 4,081 7,699 - 11,780
-------------- -------- -------- ------------- -------- -------- -------- ------------- --------
Food cost 1,311 1,910 - 3,221 961 1,589 - 2,550
Food
percentage 25.8% 22.0% - 23.5% 23.6% 20.7% - 21.7%
-------------- -------- -------- ------------- -------- -------- -------- ------------- --------
Labour cost 2,559 3,625 - 6,184 2,362 3.334 - 5,696
Labour
percentage 50.3% 41.7% - 44.9% 57.9% 43.4% - 48.4%
-------------- -------- -------- ------------- -------- -------- -------- ------------- --------
Order count 180,459 246,786 - 427,245 136,427 215,912 - 352,339
Average
ticket
(CHF) 28.16 34.95 - 31.66 29.76 35.53 - 33.29
-------------- -------- -------- ------------- -------- -------- -------- ------------- --------
Interest
revenue - - 3 3 - - 63 63
Interest
expense - - 59 59 - - 8 8
Depreciation
/
Amortisation 229 188 80 497 460 348 195 1,003
-------------- -------- -------- ------------- -------- -------- -------- ------------- --------
Assets
Segment
Assets 1,152 636 - 1,788 969 823 - 1,793
Unallocated
Assets - - 3,729 3,729 - - 2,309 2,309
-------------- -------- -------- ------------- -------- -------- -------- ------------- --------
Total Assets 1,152 636 3,729 5,517 969 823 2,309 4,102
============== ======== ======== ============= ======== ======== ======== ============= ========
Segment performance is evaluated based on key performance
indicators such as, sales, order count, average ticket value, cost
of labour and food cost. Head office costs are not allocated to
operating segments.
These Financial Statements do not provide information in
relation to segmentation to the extent anticipated under IFRS 8
since it would not be in the company's best interests to disclose
such detailed competitor sensitive information.
Geographical segment:
Turnover and results are attributable to Switzerland. There are
no trading revenues in Luxembourg or Liechtenstein.
7. Earnings (loss) per share (EPS)
The calculation of the basic earnings per share is determined on
the loss attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year. The
calculation of diluted earnings per share is based on the basic
earnings per share, adjusted to allow for the issue of shares, on
the assumed conversion of all dilutive options and other dilutive
potential ordinary shares. During the year the Company issued new
shares (see note 20) and the comparative earnings per share have
been adjusted to reflect these changes. The elements used in the
calculation are:
2010 2009
Number of issued shares of CHF 0.02 each 202,918,941 88,946,550
------------ ------------
The weighted average number of shares in
circulation during the year was: 114,342,506 37,050,660
------------ ------------
CHF CHF
Loss for the year (1,667,447) (3,013,973)
------------ ------------
Basic (loss) per share (0.01) (0.08)
Diluted (loss) per share (0.01) (0.08)
------------ ------------
The diluted loss per share reflects the effects of the exercise
of the outstanding warrants (see Note 20). The directors consider
that there is no dilutive effect of the 2,181,256 share options
issued because the fair price of the shares is substantially lower
than the exercise price so that it is most improbable that the
options would be exercised in the foreseeable future at their
exercise prices of GBP0.3888 and GBP0.2417 and GBP0.1892.
8. Staff costs
2010 2009
CHF CHF
Wages and salaries 6,612,593 6,227,759
Social security and state pension costs 752,743 536,063
Fees and costs of the Board of Directors 240,537 417,701
Other staff costs 48,013 116,842
---------- ----------
Total 7,653,886 7,298,365
========== ==========
CHF CHF
Salaries and fees of directors and of companies under
their
control amounted to: 240,537 363,681
---------- ----------
Remuneration to key members of management amounted
to: 869,137 599,690
---------- ----------
Directors' total remuneration: 106,456 100,112
Simon Bentley 67,020 55,110
Bruce Vandenberg 67,020 63,357
Roberto Avondo 0 77,040
Yair Hasson 0 63,770
Amir Hasson
---------- ----------
Social security costs comprise the Company's legal obligations
to contribute to the Swiss State national health and pension funds
and private pension plans of certain employees. There is no Company
private pension scheme in force for the directors.
2010 2009
The average number of employees by category was:
Production and sales distribution 246 249
Administration 6 5
----- -----
Total 255 254
===== =====
9. Administrative expenses
2010 2009
CHF CHF
Marketing costs and royalties 1,702,450 924,306
Administration and general expenses 2,217,437 2,624,124
---------- ----------
Total 3,919,887 3,548,430
========== ==========
10. Interest and financial income
2010 2009
CHF CHF
Interest income 2,969 1,947
Foreign currency gains - 61,321
------ -------
Total 2,969 63,268
====== =======
11. Interest and financial charges
2010 2009
CHF CHF
Finance lease interest - 5,816
Interest on Shareholder loan 24,939 -
Other interest expense 14,207 -
Other financial charges 5,870 1,745
Foreign currency losses 13,685 -
------- ------
Total 58,700 7,561
======= ======
12. Income tax expense
The Company is fully taxable in Luxembourg and Switzerland on
profits realised from its operations. There were no taxable profits
attributable to Switzerland and Luxembourg during the years 2010
and 2009. There is no taxation charge in Switzerland because the
Company has incurred tax losses and no tax charge in Luxembourg
because the Company has tax losses brought forward from previous
years.
There were no taxable profits attributable to Luxembourg during
the above years.
2010 2009
The tax charge is determined as follows: CHF CHF
Pre tax loss for the year before tax (1,667,447) (3,013,973)
Expected tax charge for the year: - -
The effective tax rates on profits are:
Luxembourg 28.59% 28.59%
Switzerland 21% to 25% 21% to 25%
13. Intangible fixed assets
At cost, in thousands of Swiss Francs Software Licenses Total
Year 2010 CHF CHF CHF
Gross carrying amount at cost at 1
January2010 101.7 354.0 455.7
Additions 24.1 - 24.1
--------- --------- --------
Gross carrying amount at 31 December 2010 125.8 354.0 479.8
Accumulated amortisation brought forward (98.7) (258.3) (357.0)
Amortisation charge for the year (3.4) (24.4) (27.8)
--------- --------- --------
Net book value at 31 December 2010 23.7 71.3 95.0
--------- --------- --------
Year 2009: CHF CHF CHF
Gross carrying amount at cost at 1
January2009 101.5 354.0 455.5
Additions 0.2 - 0.2
--------- --------- --------
Gross carrying amount at 31 December 2009 101.7 354.0 455.7
Accumulated amortisation brought forward (99.8) (215.6) (315.4)
Amortisation charge for the year 1.1 (42.7) (41.6)
--------- --------- --------
Net book value at 31 December 2009 3.0 95.7 98.7
--------- --------- --------
Licenses include an initial payment of CHF 328,901 to acquire
the operating franchise license for "Domino's Pizza" for a period
of 15 years in Luxembourg, Liechtenstein and Switzerland. The
license expires in the year 2014 and is subject to renewal.
14. Property, plant and equipment
Store
fixtures, Office
At cost, in fittings furniture
thousands of Land and & & Motor
Swiss Francs buildings equipment equipment vehicles Total
---------- ---------- ---------- ---------- ----------
Year 2010 CHF CHF CHF CHF CHF
Gross carrying
amount at cost
at 1 January
2010 254.4 4,615.3 444.4 947.8 6,261.9
-
reclassification - - - - -
Additions - 325.6 25.1 162.9 513.6
Reduction (254.4) (1,230.3) (337.2) (608.3) (2,430.2)
---------- ---------- ---------- ---------- ----------
Gross carrying
amount at 31
December 2010 0.0 3,710.6 132.3 502.4 4,345.3
Less accumulated
depreciation (9.2) (3,239.0) (380.5) (737.8) (4,366.5)
- brought forward
- depreciation
charge for the
year (1.1) (314.9) (27.9) (125.3) (469.2)
- disposals
depreciation 10.3 1,209.8 337.2 608.3 2,165.6
---------- ---------- ---------- ---------- ----------
Net book value at
31 December
2010 0.0 1,366.5 61.1 247.6 1,675.2
---------- ---------- ---------- ---------- ----------
Year 2009
Gross carrying
amount at cost
at 01/01/2009 254.4 4,228.1 390.0 793.4 5,665.9
-
reclassification - - - (15.5) (15.5)
Additions - 387.2 54.4 182.9 624.5
Reduction - - - (13.0) (13.0)
---------- ---------- ---------- ---------- ----------
Gross carrying
amount at 31
December 2009 254.4 4,615.3 444.4 947.8 6261.9
Less accumulated
depreciation
- brought forward (4.6) (2,414.5) (352.6) (662.3) (3,434.0)
-
reclassification - - - 15.6 15.6
- depreciation
charge for the
year (4.6) (824.5) (27.9) (104.1) (961.1)
- disposals
depreciation - - - 13.0 13.0
---------- ---------- ---------- ---------- ----------
Net book value at
31 December
2009 245.2 1,376.3 63.9 210.0 1,895.4
---------- ---------- ---------- ---------- ----------
Reclassification:
Certain motor vehicles, which were removed from service in 2008,
were included under this heading in 2009.
Disposals:
The Company sold the freehold premises in Renens and disposed of
the equipment in both Renens and Muttenz in 2010. The freehold
property in Renens had been written down to CHF 250,000 in 2009 and
this was the price, which the Company was able to achieve net of
costs. The store equipment and installations were either sold or
transferred to other locations. The on sale store equipment and
installations transferred have been written down to CHF 10,949 in
Muttenz and CHF 10,000 in Renens and a small profit was made on the
equipment and installations sold.
The Company has written off various assets in 2010, which were
fully depreciated and no longer used in the business.
The net carrying amount of assets held under finance leases
amounted to:
2010 2009
CHF CHF
Equipment 8,235 26,980
Motor vehicles 95,034 54,947
-------- -------
Total 103,269 81,927
======== =======
15. Financial assets
2010 2009
CHF CHF
-------- --------
Bank guarantee deposits 185,719 175,474
======== ========
Deposits are made with the Company's bankers as guarantees for
lease of premises, stores and vehicles. They are stated at fair
values.
16. Deposit re: Acquisition
2010 2009
CHF CHF
Pagonia Holding AG 744,884 -
Costs of Acquisition 37,763 -
-------- -----
Total 782,647 -
======== =====
The Company paid CHF 744,884 for 100% of the share capital of
Pagonia Holding AG, the owner of the Pizza Taxi brand, on 31
December 2010. A further payment of CHF 195,116 was due by February
28(th) , 2011 should certain conditions be met. As mentioned in
Post Balance Sheet Events in the CEO Report these conditions were
not met and the second payment therefore lapsed. The acquisition
became effective on January 1(st) 2011 and the Company therefore
had no control over Pagonia Holding AG or its subsidiaries prior to
the year-end. Furthermore the Company did not have any Directors in
place and had no signing powers relating to Pagonia Holding AG or
its subsidiaries during 2010. Pagonia Holding AG has three 100%
subsidiaries, Pizza Taxi GmbH, Pizza Taxi Handels GmbH and Lang Tsu
AG. Pizza Taxi GmbH has four Pizza delivery franchisees in the
Basel region and at least three of these businesses will be
converted into Domino's stores during 2011. Given that the 2010
Financial Statements for Pagonia Holding AG and its subsidiaries
have not yet been completed for 2010, it is not possible to provide
further information as would be required by IFRS 3 at the current
time.
17. Deferred tax asset
2010 2009
CHF CHF
Balance at beginning of year 630,840 640,814
Deferred tax credit (charge) for the year 443,245 (9,974)
---------- --------
Balance at end of year 1,074,085 630,840
========== ========
The Directors consider that the pre tax losses of the years 2009
and 2010 will be available to offset against future available
profits.
Luxembourg tax losses incurred in respect of Luxembourg
operations have not been used to constitute a deferred tax asset
since it is uncertain when those losses may be utilised.
2010 2009
The deferred tax was determined as follows: CHF CHF
Swiss tax losses to set off against future profits: 2,110,693 3,003,999
---------- ----------
Deferred tax asset on Swiss tax losses at a tax rate
of 21% (2008 25%) 443,245 630,840
---------- ----------
Final tax assessments of the Swiss branch are outstanding. Final
tax assessments have been received for Luxembourg up to the year
2008. Tax losses in Luxembourg may be carried forward
indefinitely.
18. Stocks
2010 2009
CHF CHF
Raw materials - foods and beverages 210,150 207,806
Other consumables 72,400 68,738
-------- --------
Total 282,550 276,544
======== ========
All stocks are stated at cost, which approximates their fair
values.
19. Trade and other receivables
2010 2009
Amounts falling due within one year: CHF CHF
Trade debtors - 5,000
Other debtors, prepayments and accrued income 274,850 142,790
-------- --------
Total 274,850 147,790
======== ========
20. Capital and reserves
Share capital 2010 2009
CHF CHF
Allotted, issued and fully paid up at beginning
of year 1,778,931 10,128,006
Cancellation of old shares of CHF 2.1 each - (9,669,075)
Issue of new shares of CHF 0.02 each 2,279,448 1,320,000
---------- ------------
Allotted, issued and fully paid up at end of year 4,058,379 1,778,931
========== ============
Represented by 202,918,941 shares of CHF 0.02 each (2009:
88,946,550 shares of CHF 0.02 each)
The Company has one class of share, which carries equal voting
rights and rights to distributions of dividends from available
retained earnings. On 16 and 17 February 2010, the Company raised
CHF 625,209 of fresh capital via the issue of 21,666,667 shares at
a price of GBP0.018 per share. On 9 November 2010, the Company
raised CHF 1,913,204 of fresh capital via the issue of 44,945,455
shares at a price of GBP0.0275 per share. On 30 December 2010 the
Company issued a further 47,360,269 new shares. Of this total
40,979,469 were issued at a price of GBP 0.017 for the conversion
of the loan and accrued interest obtained from NobleRock Capital
s.a.r.l. The other 6,380,800 new shares were issued at a price of
GBP 0.0275 as part payment for the acquisition of Pagonia Holding
AG.
Stock option plan
On 1st August 2005, the general meeting of shareholders of the
Company approved a stock option plan for the benefit of the
directors and key employees. At 31 December 2010 and 2009 there
were in circulation 1,849,918 options at GBP0.389, 229,467 options
at GBP0.242 and 101,871 options at GBP0.189.
Warrants
As at 31 December 2010 (2009; 0) there were the following
warrants outstanding; 1,070,777 warrants at GBP0.018 and 184,000
warrants at GBP0.0275.
Share premium - on issue of new shares 2010 2009
CHF CHF
Balance at beginning of year 2,508,760 1,959,535
Increase during the year 1,541,778 620,868
Less charges of raising finance (99,715) (71,643)
---------- ----------
Share premium balance at end of year 3,950,823 2,508,760
========== ==========
Legal reserve
The Company is obliged to make a transfer of at least 5% of its
annual net profits to a legal reserve. Retained losses are deducted
in determining the amount of the annual transfer. This transfer
ceases when the legal reserve is equal to 10% of the subscribed
share capital, but recommences if it falls below this level. The
legal reserve is not available for distribution, except on
dissolution. A legal reserve is not required since the Company has
accumulated losses.
21. Non-current liabilities
2010 2009
CHF CHF
------- -------
Obligations under finance leases and hire purchase
contracts 32,412 24,366
======= =======
Obligations under finance leases in respect of equipment and
vehicles are for periods of two to four years and are recorded as
liabilities in the balance sheet. The lease contracts bear interest
at rates of between 4.28% and 11.5% per annum and are repayable in
fixed monthly installments of principal capital and interest over
the period of the lease. In the event that lease obligations are
not fulfilled, the lessor has a right to recover the asset.
The leases to which these amounts relate, expire
as follows: 2010 2009
CHF CHF
In one year or less (classified as a current liability) 71,772 34,174
Between one and five years (classified as a non-current
liability) 32,412 24,366
In five years or more (classified as a non-current
liability) - -
-------- -------
104,183 58,540
======== =======
Aggregate minimum lease payments due under the contracts
inclusive of finance charges 104,183 58,540
-------- -------
The finance charges therein 5,759 7,288
-------- -------
22. Trade and other payables
2010 2009
Amounts falling due within one year CHF CHF
Trade creditors 1,416,367 1,627,850
Taxes and social security 431,740 689,392
Other creditors, accruals and deferred income 912,080 1,020,941
---------- ----------
Total 2,760,187 3,338,183
========== ==========
As at 31 December 2010 the Company had some payment delays with
respect to social security and certain marketing and legal
payables. The Company has negotiated with the respective
counterparties and concluded agreements fixing reimbursement plans
so that these payment delays can be considered as remedied. No
other payment delays in respect of loans or other payables exist
that would permit the lender to demand accelerated repayment in the
course of the financial year 2011.
23. Provisions for other liabilities and charges
2010 2009
CHF CHF
Brought forward from 2009 750,000 801,863
Charged in the current year:
Claims for compensation and benefits (111,416) (51,863)
Provisions for legal charges - -
---------- ---------
Balance carried forward 31.12.2010 638,584 750,000
========== =========
During 2008 Management discussed labour relations in the
Company's sector of activity with Swiss union representatives. The
discussions included topics surrounding compliance with regulatory
requirements relating to minimal compensation and benefits due to
employees. One of the purposes was to clarify the amounts that may
have to be paid to employees in order to comply with regulatory
requirements relating to minimal compensation and benefits that
came into effect during the course of 2005. The Company settled
several cases in 2010 but is currently still contesting other cases
from employees or former employees and the outcome of these cases
together with their financial impact remain uncertain. The
Directors therefore consider it prudent to maintain a provision of
CHF 638,584 as at 31 December 2010 in order to cover any potential
liability that may arise from these cases.
24. Capital and contractual commitments
Under a franchise agreement with Domino's Pizza International
Inc. USA, the Company has a commitment to pay US$10,000 on the
opening of every new store from the ninth store onwards. In
addition the Company has to pay a royalty fee to Domino's Pizza
International Inc. based on its sales and is required to set aside
a percentage of its sales revenue for advertising and
marketing.
25. Leasing commitments
Operating leases
The Company has commitments under several short-term and
long-term operating leases in respect of its offices, stores and
related parking. The offices and stores leases are for periods of 5
years, renewable, and with cancellation notice periods of six
months before the expiry of the contract. In the event of
cancellation before the expiry of the term of the lease, penalty
cancellation charges are payable.
2010 2009
CHF CHF
Charge for operating leases for the year 589,480 656,444
---------- ----------
The future minimum payments under these leases mature
as follows:
In one year or less 579,923 490,787
Between one and five years 1,088,057 1,277,972
In five years or more 88,000 209,861
---------- ----------
Total 1,755,980 1,978,620
========== ==========
26. Financial risk management
The Company's turnover is primarily dependent on a single
product, being the production and sale of pizzas. The Company's
licence for Domino's Pizza is limited to Switzerland, Liechtenstein
and Luxembourg.
The Company's financial risk management objectives consist of
identifying and monitoring those risks, which have an adverse
impact on the value of the Company's financial assets and
liabilities or on reported profitability and on the cash flow of
the Company.
The Company's principal financial liabilities consist of finance
leases. The Company financial assets consist of receivables [as
there are zero trade debtors] and cash, which arise directly from
its operations. The Company has not entered into any derivative
transactions.
The main risks arising from the Company's business are foreign
exchange risk, credit risk and liquidity risk. The Board reviews
and agrees policies for managing each of these risks which are
summarised below:
Foreign Currency Risk
The Company makes all of its sales in Switzerland, issues shares
in sterling and buys goods and services in currencies other than
Swiss Francs. Movements in the exchange rates can effect the value
of the Company's non Swiss Franc liabilities. Wherever possible the
Company tries to match funds available in one particular currency
with expenditures in the same currency. Should this not be
possible, the Company uses spot foreign exchange contracts to the
extent necessary to meet its obligations in other currencies. The
Board does not consider there to be a significant unmitigated risk
for the results of the Company.
Credit Risk
Sales are mainly carried out in cash or by credit card payments.
Management has implemented controls to monitor the cash
collections. Exposure to credit risk is limited to the amount of
receivables from credit card processing companies. The receivables
are stated net of provisions for doubtful debts estimated by
management based on collections and economic conditions. The
Company is not dependent on key customers and has no significant
risk associated to any one customer. The directors consider that
the carrying values of receivables approximate their fair
value.
Liquid funds assets are placed with regulated banks in
Switzerland, in Luxembourg and Great Britain. The year-end balances
represent their fair value.
Liquidity Risk
The Company aims to mitigate liquidity risk by managing cash
generation by its operations. The Board approves all major
investment decisions as part of a project appraisal and approval
process. The Board is constantly reviewing possible sources of
funds in order to reduce the liquidity risk of the Company.
Capital Management
The primary objective of the Company's capital management is to
ensure that the Company remains solvent at all times and is
therefore able to support its business development and maximise
shareholder value.
The Board monitors the capital requirements of the business at
all times and has issued and will, in future, issue new shares in
the market as deemed appropriate. Any assets deemed not necessary
for the business are liquidated in order to provide additional
resources to the Company. The Company has no outstanding loans and
only a limited amount of financial leases.
27. Related parties
From February 2008 until February 2010, the Company was
controlled by NobleRock Capital sarl, a company incorporated under
the laws of Luxembourg. Since February 2010 NobleRock Capital sarl
no longer holds the majority of the shares but it is still the
major shareholder with 41.75% of the Company's shares. Other than
remuneration paid to directors for their daily management of the
Company's affairs, there were no other transactions with related
parties. The acquisition of shares by Directors pursuant to the
December placing was a related party transaction under the AIM
Rules. The Company's Nominated Adviser, having consulted with the
Directors, considered that the terms of this related party
transaction were fair and reasonable insofar as the Company's
shareholders are concerned.
28. Reconciliation of net cash flows from operating activities
before movements in working capital
2010 2009
CHF CHF
Loss on ordinary activities before taxation (1,667,447) (3,013,973)
Adjustments for:
Depreciation and amortisation 497,081 1,002,691
Deferred tax charge (credit) (443,245) 9,974
Provisions for charges - -
Financial interest result 36,176 3,868
------------ ------------
Operating cash flows before movements in working
capital (1,577,435) (1,997,439)
============ ============
This information is provided by RNS
The company news service from the London Stock Exchange
END
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