2015 August Edison Report

Building a global brand

CGF’s business plan is to significantly grow its Esquires Coffee House franchise business from its current 77 stores into a major international brand across Europe, the Middle East, Asia and North America. The company expects to have 710 stores (all franchised) by FY21, from which it will earn royalties paid by franchisees, revenue from the sale of master franchises and sales from coffee and other products to the franchises. In the near term, the company expects to build flagship stores in new territories such as the US and then sell them on as it establishes master or regional franchises. It has also been sharing the cost of updating its UK stores with the franchisees, with an immediate benefit of a sales uplift. CGF has plans to bring its coffee roasting in-house, which should deliver mid-teens earnings improvement in the medium term.

Recapitalisation plan

The company has announced a significant restructuring and capitalisation plan which, subject to shareholder approval, will result in one if its key Chinese partners, Jiajiayue Group (JJY), becoming a 25.3% shareholder. JJY and CGF chairman Keith Jackson have negotiated to jointly acquire all but 1m shares of the 40.38% stake held by DSL Management and plan to inject NZ$9m into the company in exchange for 70.3m shares. It is proposed that a further NZ$9m be sought via a public offer to help fund the company’s growth plans. This will position the company to focus on driving store growth in existing and new territories and help create a war chest for additional acquisitions.

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