Cooks Food Group reverses loss
NZX-listed Cooks Food Group has been able to post a profit by writing off debt and receiving a refund of interest paid on loans, its full-year financial results show.
The company's net profit after tax for the year ending March 31 was $1.16 million, up from a $592,000 loss in 2012.
Cooks chairman Keith Jackson said the company was on the pathway to transforming itself into an integrated global coffee chain through the purchase of the Esquires Coffee franchise, which was announced last month.
He had written off the loans he, his family, and his other companies had made to Cooks, and reversed the interest payments Cooks had made, Jackson said.
The loan write-off and the interest payment reversal made it easier for the company to take the next steps towards developing the Esquires global brand, he said.
The interest payment reversal was reported as $1.5m of sundry, or other, income.
Despite the company's improved financial position it was not able to pay a dividend or directors' fees.
The report showed the company borrowed $3.7m in the year to March, and made $361,000 in loan repayments.
Cooks also made an unsecured advance of $200,000 to related company Dairyland Products, the report showed.
Cooks holds 42 per cent of Dairyland's shares.
An auditor's note in the report draws attention to Cooks' ongoing financial reliance on Jackson's other companies.
In the report Jackson said he would provide financial support to Cooks for the next 12 months and would not demand repayments while the company had negative equity.
However, the financial report did not include adjustments that could be necessary if Jackson withdrew his support, the auditor said.
Jackson said he could guarantee ongoing financial support for the company while it continued its transformation.
The loans from his other interests had been necessary to keep Cooks going while the company was searching for an opportunity like the Esquires deal, he said.
"We are very confident. We become more confident all the time with the fantastic opportunities we have."
The shell company announced last month that it had acquired Franchise Development (FDL), the company that owns the Esquires Coffee chain from local entrepreneurs Stuart and Lewis Deeks who founded Esquires Coffee House in New Zealand.
Fairfax previously reported the purchase of FDL was funded through an issue of shares in Cooks to the Deeks and a cash payment of $300,000.
Cooks' financials showed the company also made a secured advance to FDL of $1.14m so the company could buy Canadian global master franchisor Esquires Coffee International.
In March Cooks made a deposit of $83,837 for the intellectual property of Esquires Coffee International, the report said.
Cooks' report showed a total of $1.24m was spent on buying business assets during the year.
Jackson said in June that the company had also reached an agreement, subject to shareholder approval, to raise more than $4m in cash from a share offer to qualified investors.
The money raised would be used to fund the cash components of the company's purchases and provide working capital, he said.
At the year ending March 31 Jackson was Cooks' majority shareholder through stocks owned by himself, companies he was a director of, and his family trust.
Upon completion of the deal with FDL the Deeks would become majority shareholders.
Last month Cooks said it was also in negotiations to acquire a New Zealand-based food processing business and some offshore retail businesses.