Cooks Global Foods said advanced talks to establish a new joint venture with Chinese partners and the sale of its Progressive Processors unit mean it may transition to cashflow breakeven in the 2018 financial year although both initiatives will likely mean a non-cash write down of $4 million in the year that ended March 31, 2017.
The initiatives "have the potential to significantly accelerate the growth of the coffee operations whilst reducing the demands on Cooks' financial resources and allowing the company to target a transition to generating positive cashflows in the year to 31 March 2018," the company, which owns the master franchise rights for the Esquires Coffee chain outside New Zealand and Australia, said in a release.
In December, the NZAX-listed company said its net loss widened to $3.8m, or 92 cents per share, in the six months to September 30, from $1.6m, or 46 cents per share, a year earlier.
On Thursday, it said the new initiatives will accelerate growth in China while saving the company around $4m in cash in the first year following conclusion of the agreements. The sale of Progressive Processors ensures its investment programs are directed at core business opportunities, it said.
According to Cooks, Progressive Processors management have acquired Progressive's assets and stock and in return have agreed to relinquish the 2.5 million shares they hold in Cooks. Cooks now has a call option over these shares and may place them to investors at its discretion. The transaction will result in Cooks writing down the carrying value of Progressive by $500,000 and that charge will be incurred in the year that ended March 31, it said.
