While South African franchiser Gold Brands’ revenue for the six months ended August 31 fell 72.6% to R27.6-million year-on-year, owing to losses experienced from store closures incurred by lease expiries, the company’s gross profit margin increased from 30.9% to 47.3%, thanks to a more aligned sales mix and ongoing revision and implementation of stricter controls.
The company on Thursday explained that the significant decline in revenue was also a result of the economic slowdown, compounded by management's restructuring of Gold Brands’ portfolio, the internal restructuring of management's supply chain to further reduce risks, and the relocation of the company’s remodelled Chesanyama stores into higher-demographic areas.
Gold Brands added that the benefits of its streamlining procurement arrangements with selected suppliers, including the innovative introduction of a prepaid online meat supplier, contributed to a 79.1% reduction in cost of sales year-on-year.
Meanwhile, operating expenses also declined year-on-year by 25.1% to R19.4-million, with the group continuing to achieve lower transport costs as a result of better route planning and tighter controls, which resulted in a reduction of its fleet, fuel costs, insurance premiums, finance charges and wear and tear.
However, Gold Brands’ financial results indicate that the group incurred a net loss of R2.69-million, with current liabilities having exceeded the current assets by R19.7-million at the end of the period.
“These conditions indicate that a material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern,” Gold Brands indicated.
However, Gold Brands believes that the introduction of new themed brands into its portfolio makes it “unique” in the food industry, which will attract interest from investors. “This new portfolio of brands will give a higher return on investment, driving new business sales as well as sales through our distribution centre,” it said.
The company added that, owing to the successful roll-out of Chesanyama as a franchise brand in South Africa over the past five years, it has to be remodelled to international standards, presenting the South African traditions in look and feel, taste and experience. “This will successfully compete with any national or international brand in the quick-service restaurant market.
“We will see the launch of Chesanyama UK in the first quarter of 2018 and, using the existing client base received at our HSBC presentation, we will pursue to identify potential sites to open four Chesanyama stores in the UK during 2018,” the group said.
South African consumers will also see the rolling out of the larger new-look casual dining Chesanyama stores, as well as the drive-thru concepts.
With the finalisation of the development agreement with the UK's Casual Dining Group's brands in South Africa, two initial sites have been identified for the launch of Latin-American restaurant Las Iguanas and the French Bistro Café Rouge in the first quarter of 2018.
“In addition to our franchise model, we intend to open limited company-owned high-end brands over the next two years in high-visibility locations,” it added.
More focus has been placed on improving the 1+1 Pizza brand through menu improvement; this brand already has two more stores opening in the three months after the reporting period.
“It is evident that the prevailing market volatility and uncertainty are exposing businesses to an increasing number of risks and therefore we are mitigating our risks by the use of an outsourced prepaid online ordering platform,” it added.