Cooks Coffee Company - Interim Results

The attached notes form part of and are to be read in conjunction with these financial statements.

Unaudited Condensed Interim Statement of Cash Flows

For the six months ended 30 September 2023

The following is a reconciliation between loss after taxation for the period shown in the statement of comprehensive income and net cash flows from operating activities.

The attached notes form part of and are to be read in conjunction with these financial statements.

Notes to and forming part of the Unaudited Interim Financial Statements

For the six months ended 30 September 2023

The Group's reportable segments are business units deriving Royalties, Product Sales, Franchise Fees and New Store Construction Revenue from Franchisees in geographical locations.

The New Zealand segment represents the head office operation for the Group. The franchise coffee store business, operating under the Esquires and Triple Two brands, covers the New Zealand Global Franchise trading entity and all regions owned by third party Master Franchisees; and the UK and Ireland franchising business segment owned directly by the Group.

The Group has also separated operating segments for the business activities intended to be sold (now relating to one owned Esquires store in the UK).

Segment information for the reporting period is as follows:

1.  General information

Cooks Coffee Company Limited ("Company" or "Parent"), together with its subsidiaries (the "Group") operate in the food and beverage industry.

The Company is a limited liability company incorporated and domiciled in New Zealand and is listed on the NZX Main Market board of the New Zealand stock exchange.

Statutory base

The Company is registered under the Companies Act 1993 and is a FMC reporting entity under part 7 of the Financial Markets Conduct Act 2013.

Reporting framework

The unaudited interim financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards ("IFRS") and other applicable New Zealand Reporting Standards as appropriate for profit-oriented entities. The financial statements comply with IFRS. These policies have been consistently applied to all periods presented, unless otherwise noted.

These financial statements for the six months ended 30 September 2023 have been prepared in accordance with NZ IAS 34, Interim Financial Reporting and should be read in conjunction with the financial statements published in the Annual Report for the year ended 31 March 2023. They also comply with the International Accounting Standard 34 interim Financial Reporting (IAS 34).

2.  Changes in significant accounting policies

Except as described below, the accounting policies applied by the Group in these consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 March 2023. The Group has not applied any standards, amendments and interpretations that are not yet effective.

3.  Profit/(loss) per share

Basic profit/(loss) per share is calculated by dividing the profit/(loss) attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding for the period.

Diluted profit/(loss) per share is determined by dividing the profit/(loss) attributable to ordinary shareholders and the weighted average number of shares outstanding for the effects of any dilutive potential ordinary shares.

Net tangible assets per share is determined by dividing the net asset value of the Group, adjusted by the intangible assets, and the number of shares issued at the end of the period.

The weighted average numbers of shares are calculated below:

4.  Share Capital

The share capital of Cooks Global Foods Limited consists of issued ordinary shares, each share representing one vote at the company's shareholder meetings. The par value is nil (2023: nil). All shares are equally eligible to receive dividends and the repayment of capital.

The company now has 56,699,955 quoted shares and 1,207,000 non-voting shares on issue at 30 September 2023. During the year, 3,388,837 shares were cancelled at $nil value and 569,444 shares were issued on 28 August 2023 at a value of $150,000.

At 30 September 2023, $nil of the ordinary share capital is unpaid (31 March 2023: $nil).

5.  Related party transactions

The Group's related parties include the directors and senior management personnel of the Group and any associated parties as described below. 

Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. 

Keith Jackson is a director of Cooks Investment Holdings Limited, Jackson & Associates Limited, Ascension Capital, Weihai Station Limited, Triple Two Holdings Limited, Triple Two Coffee Franchise Limited, TTC Contractors Limited, Triple Two Coffee Property Limited and Triple Two Coffee London Limited and a trustee of Nikau Trust.

Mike Hutcheson is a director of Image Centre Limited and Lighthouse Ventures Holdings Limited.

Paul Elliott is a director of Elliott Capital Advisors Limited.

Michael Ambrose is a director of Ashville Consultancy Limited.

Peihuan Wang is a director of Jiajiayue Holding Group Limited and Weihai Station Limited.

Elena Garside is a director of Garside & Garside Ltd

Tony McVerry is a director of Esquires Coffee Houses Ireland Limited.

Aiden Keegan is a director of Esquires Coffee UK Limited, Triple Two Coffee Holdings Limited, Triple Two Coffee Franchise Limited, TTC Contractors Limited, Triple Two Coffee Property Limited and Triple Two Coffee London Limited.

David Hodgetts was a director of Triple Two Coffee Holdings Limited, Triple Two Coffee Franchise Limited, TTC Contractors Limited, Triple Two Coffee Property Limited and Triple Two Coffee London Limited until 31 July 2023.

Sezan Hodgetts was a director of Triple Two Coffee Holdings Limited, Triple Two Coffee Franchise Limited, TTC Contractors Limited, Triple Two Coffee Property Limited and Triple Two Coffee London Limited until 31 July 2023.

Graham Hodgetts was a director of Triple Two Coffee Holdings Limited, Triple Two Coffee Franchise Limited, TTC Contractors Limited, Triple Two Coffee Property Limited and Triple Two Coffee London Limited until 31 March 2023.

Alistair Tillen was a director of Triple Two Coffee Holdings Limited, Triple Two Coffee Franchise Limited, TTC Contractors Limited, Triple Two Coffee Property Limited and Triple Two Coffee London Limited until 31 May 2023

Transactions with related parties

Balances outstanding with related parties

Director transactions

6.  Capital Commitments, Contingent Liabilities

There were no capital commitments as at 30 September 2023 (31 March 2023: $nil).

There were no changes in capital commitments, contingent liabilities and contingent assets that would require disclosure for the six months ended 30 September 2023 (31 March 2023: $nil).

7.  Going Concern

The Group reported a comprehensive loss of $5,156,000 (2022: $62,000) for the six-month period to 30 September 2023. This included the write down of $4,788,000 related to the impairment of the Triple Two investment.

Operating net cash inflow for the six-month period to 30 September 2023 was $330,000. For the twelve-month period ended 31 March 2023 the net cash outflow was $484,000.

As at 30 September 2023 the Group has reported Net Liabilities of $3,593,000 (at 31 March 2023: $1,413,000) and current liabilities exceed current assets by an amount of $4,813,000 (at 31 March 2023: $6,263,000).

The ability of the Group to pay its debts as they fall due and to realise their assets and extinguish their liabilities in the normal course of business at the amounts stated in the consolidated financial statements has been considered by the Directors in the adoption of the going concern assumption during the preparation of these financial statements.

The Directors forecast that the Group can manage its cash flow requirements at levels appropriate to meet its cash commitments for the foreseeable future being a period of at least 12 months from the date of authorisation of these consolidated financial statements. In reaching this conclusion, the Directors have considered the achievability of the plans and assumptions underlying those forecasts. The key assumptions include:

•      Opening multiple new stores in the United Kingdom in FY23, with a net four new sites already opened in the first half of the year, and in excess of a further six sites confirmed for the second half of the year.

•      Group's ability to successfully conclude remaining discussions regarding the roll-over of existing debt.

•      Group's ability to raise further debt or equity funds as a strategy to re-gear the balance sheet as part of the overall restructuring plan that is still in progress.

•      The ability of related parties of Keith Jackson to continue to provide funding as required, and market conditions which the Group operates in.

The Directors have reasonable expectation that the Group has sufficient headroom in its cash resources and shareholder support to allow the Group to continue to operate for the foreseeable future or alternatively it can manage its working capital requirements to create additional required headroom.

Any significant departure from the above assumptions may cast significant doubt over the ability to continue as a going concern for the foreseeable future.

Whilst the Directors acknowledge that there are capital raising, credit, exchange and liquidity risks in the global economic market in which the Group operates, they are confident that additional capital or funding will be sourced by the Group. In particular, the Directors have received a confirmation from related parties of Keith Jackson, that they will continue to financially support the Group for the foreseeable future. They note the Group has a track record of obtaining financial support from cornerstone investors and related parties and, where necessary, negotiating the deferment of debt repayments.

The Directors are also confident that operating cash flows will continue to improve as a result of the activities that are being undertaken, and the disposal of remaining assets held for sale in the UK, to reduce the extent of cash outflow and improve profitability.

The Directors continue to consider other opportunities to further improve the Group's cash position which include discussing collaborations with partners overseas, negotiations with potential strategic equity partners, investigating new facility lines, ongoing discussions in the UK and Ireland relating to potential acquisitions, and greater focus on improving existing core business activities.

After considering all available information, the Directors have concluded that there are reasonable grounds to believe that the forecasts and plans are achievable, the Group will be able to pay its debts as and when they become due and payable, there is sufficient headroom in available cash resources, and the basis of preparation of the financial report on a going concern basis is appropriate.

Should the Group be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts different to those stated in the consolidated financial statements. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount of liabilities that might result should the Group be unable to continue as a going concern and meets its debts as and when they fall due.

8.  Subsequent Events

In November 2023 Esquires UK concluded an agreement for the sale to a Regional Developer for the Southwest UK, South Wales & West Midlands regions. The company is confident that the new business partners will accelerate growth within these regions and build the company's market share over time.