Acquisition of Little Switzerland Saves Copics – Closure of Cafes Leads to Severe Activity

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Purchase Little Switzerland Network
And consolidating its results in the first quarter of this year, allowed Copics To show a 10.5% increase in sales totaling NIS 76 million. Excluding the sales add-on, Copix had its first quarter mark this year with a 6.7% drop. The acquisition of the four-storey network in the city centers allowed the company to reduce its net loss to NIS 1.4 million, compared with a net loss of NIS 4.8 million in the corresponding quarter last year.

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Kofix, which operates a chain of cafes and a supermarket chain under the name Super Kofix (some of which have already been converted under the Rami Levy brand in the neighborhood – NC), was forced to close the cafes starting in mid-March, but on the other hand enjoyed the consumers’ onslaught on food chains during the storage of food products. blockade
And the movement restrictions that applied until after Independence Day.

The coffee arm sales of 96 coffee shops, compared with 116 in the same period last year, fell 30% to NIS 9.85 million, compared with NIS 14.1 million in the same period last year. Gross profit fell by 20.6% during the period to NIS 2.2 million. As a result of the closure of the cafes, operating expenses and operating loss fell to NIS 1.5 million, compared with an operating loss of NIS 3 million in the corresponding period last year. 84 of the cafes are operated by franchisees and the remainder by the company itself, which coped with deepening the operating loss in these branches by 20% to NIS 785,000.

While cafes sales were hit during the last two weeks of March, food stores benefited from flourishing, most notably neighborhood stores, which consumers reached due to traffic restrictions set. Super Copics sales rose 28% in the quarter to NIS 64 million. The jump was mainly achieved by consolidating the results of operations with four small Swiss chain stores whose sales totaled NIS 11.8 million during the period. Excluding the results of Little Switzerland, Super Copics recorded a mere 4.4% increase. Improving the network’s trading conditions in line with Rami’s Levy as well as the high profitability of Little Switzerland boosted its 50% gross profit to NIS 19.9 million. The company posted an operating profit of NIS 1.8 million, compared with an operating loss of NIS 242,000 in the corresponding period last year.

Kupix notes that at a time when the cafes were closed, the company posted only revenues from the writers’ activities, which accounted for 85% of the company’s activity compared to 77% in the first quarter of 2019. The company began preparing for crisis even before the release of emergency regulations for business closures, alongside actions aimed at reducing its expenses. During the crisis period to the minimum necessary in order to maintain business continuity while maintaining contact with franchisees, property owners and suppliers.

The Company’s actions mainly included a request from the cafe’s property owners to reduce the rents for the relevant periods, a notice to the company franchisees that they will not charge management fees for April, the removal of operating employees, factory and non-essential employees at Urban Copics for free leave, and for the period where the coffee shops were Closed. The Company also operated for substantial savings in the current operating expenses of the self-operating and the company’s factory cafés by reducing most expenses, switching off refrigerators, electrical systems and lighting, freezing the company’s advertising and marketing activities, stopping the plant’s production operations and stopping its distribution operations through a subcontractor. .

When the crisis broke out, the company applied to a banking institution to obtain a state guarantee loan. At this stage, the company has no indication as to whether the loan will be approved. In the Company’s estimation, its current financial strength reflected, among other things, in cash balances, liquidity and the positive cash flow from operating activities expected from the supermarket operations, will enable it to reduce the extent of its exposure to the crisis and meet its existing and expected liabilities.

Franchise Relief

In addition, the company was compiled with the crisis exit strategy plan based on the Franchise Relief Program charged under emergency regulations to close their businesses. The relief plan will be tailored to the type of concessionaire and the location of the cafe, with the aim of allowing each concessionaire to manage the initial period in which the cafes’ branches will resume operations. Assistance includes rated rents in rental and management fees (subject to discount from property owners) as well as deployment payments. A company estimates that the cost of the franchise plan for the franchise in its current format is half a million shekels.

Due to the expectation of non-return to the activities of all the cafe’s branches, the company recorded impairment of the fixed assets in the self-operating coffee shops of NIS 315,000. In addition, the Company recorded another impairment loss on the right of use resulting from the implementation of IFRS 16, NIS 350,000.

The closure of the cafes led Kupix to write a provision for NIS 250,000 in doubtful debts due to the uncertainty that exists in the economy. In addition, an inventory reduction of NIS 363,000 was made for expired products. The Company regularly reviews its compliance with the financial covenants set for it and as of the date of approval of the financial statements, the Company complies with the financial covenants and estimates that it can continue to meet them in the foreseeable future.

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