Annual Financial Report 2011

14 June 2012

Global Brands S.A.

Audited Final Results for the 12 months ended 31 December 2011

Global Brands S.A. ("Global Brands" or the "Company", AIM:GBR) today reports its audited final results for the 12 months ended 31 December 2011. With effect from 17 February 2012, the Company became an Investing Company as defined by the AIM Rules for Companies ("AIM Rules"). The results for the year to 31 December 2011 reflect the period when the Group (the Company and its subsidiaries) was the master franchise owner for Domino's Pizza in Switzerland, Luxembourg and Liechtenstein with trading operations conducted through the Company's Swiss subsidiary, Domino's Pizza Switzerland ("DPS").

Financial highlights:

·; Sales increased by 4.8% to CHF 14.44m (2010: CHF 13.78m).

·; Cost of sales increased by 4.9% to CHF 3.96m (2010: CHF 3.77m).

·; Gross profit increased by 4.7% to CHF 10.49m (2010: CHF 10.02m).

·; Staff costs were down 1.57% to CHF 7.53m (2010: CHF 7.65m) but administrative expenses, excluding depreciation and amortisation, of CHF 4.96m were up 26% on 2010; largely due increases in professional fees and expenses associated with the Austrian opportunity.

·; The depreciation charge for the year was significantly higher than in previous years, amounting to CHF 1.23m (2010: CHF 0.5m) due to a decision to write off CHF 0.48m of investments associated with the Pagonia acquisition.

·; As a result operational losses after depreciation and amortization increased to CHF 3.23m (2010: 2.05m).

·; Following the write off of the deferred tax asset balance amounting to CHF 1.07m (shown as 'Income Taxes' in the Consolidated Income Statement), the Group reported a net loss for the year of CHF 4.32m (2010 loss: CHF 1.67m).

·; The total comprehensive loss for the year amounted to CHF 1.79m (CHF 1.67m).

Post Balance Sheet Events:

On 17 February 2011, Global Brands transferred all assets and liabilities into DPS and demerged its trading business. Following the demerger, Global Brands became an Investing Company under the AIM Rules. The approved investing policy of the Company is to acquire controlling stakes, either through the issue of securities for cash, in quoted and non-quoted companies operating in the commodities sector with an emphasis on oil and gas and oil and gas services. Under AIM Rule 15, the Company must implement the Investing Policy or make an acquisition or acquisitions which constitute a reverse takeover within 12 months of the Company becoming an Investing Company.

Chairman's Statement:

The Chairman's Statement below forms part of the Global Brands annual report ("Annual Report") that has been posted to shareholders and which is also available on the Global Brands website www.globalbrands.ch.:

As shareholders are aware, 2011 proved to be a disappointing year for the Group. Trading in the first quarter was strong but conditions deteriorated in the second and third quarters. Despite being cash positive in the final quarter, the Group struggled to implement its growth strategy through sub-franchising. This, combined with the inability to raise sufficient funds to develop the Austrian market, resulted in a fundamental business review by the Directors in October 2011 and November 2011.

After considering various options, the Board recommended to shareholders to demerge the pizza business into Global Brand's Swiss subsidiary, Domino's Pizza Switzerland AG ("DPS"), effectively leaving Global Brands as a listed 'cash shell'. Additionally, as the share price was trading below the nominal value, there was a need to restructure the Company's share capital to reduce the nominal value of each ordinary share from CHF 0.02 to CHF 0.002.

In December 2011, shareholders were sent a circular proposing:

·; a demerger of the pizza business which essentially involved transferring all the assets and liabilities, from Global Brands into DPS;

·; a capital restructuring; and

·; a new investing policy.

The proposals were approved at the Extraordinary General Meeting held on 2 January 2012 and the demerger became effective on 17 February 2012.

Under the demerger, Global Brands shareholders retained their shareholding in Global Brands and received one DPS share for every Global Brands share held following the capital restructuring. Global Brands shareholders also received one Global Brands warrant for every 10 shares held in Global Brands. These warrants are exercisable at a price of £0.002 and expire on 17 August 2012.

Following the demerger, Global Brands became an Investing Company under the AIM Rules. The approved investing policy of the Company is to acquire controlling stakes, either through the issue of securities for cash, in quoted and non-quoted companies operating in the commodities sector with an emphasis on oil and gas and oil and gas services. Under AIM Rule 15, the Company must implement the Investing Policy or make an acquisition or acquisitions which constitute a reverse takeover within 12 months of the Company becoming an Investing Company i.e., by 16 February 2013.

Your Board is currently considering several potential transactions within the oil and gas sector. We believe that this is an extremely exciting sector but there is a wide variation in the quality of projects. Consequently, each potential transaction merits careful examination and this can take time. However, we expect to make further announcements on this front in due course.

Finally, I would like to thank all our stakeholders for their support over the past 12 months.

Simon Bentley, Chairman

For further information:

Notes to Editors:

Global Brands is a public company incorporated under the laws of Luxembourg established in 1999. The company has been admitted to trading on the AIM of the London Stock Exchange since 2005.

The Company is an Investing Company as defined in the AIM Rules. The investing policy of the Company is to acquire controlling stakes, either through the issue of securities or for cash, in quoted and non-quoted companies operating in the commodities sector with an emphasis on oil and gas and oil and gas services.

DIRECTORS' REPORT

Key information from the Director's Report is summarised below. The full text is available in the Annual Report.

1. Review of business

Total Group turnover for the year was up 4.8% to CHF 14.44m (2010: CHF 13.79m). As announced previously, trading conditions for the first half of the year were reasonably strong, primarily due to good trading conditions in Q1. Total sales for the first quarter increased 15.5% to CHF 3.65m. However, in Q2 sales growth started to slow; up 3.6% to CHF 3.6m on Q2 last year with like-for-like sales showing a 1.7% increase on the same period last year. The difficult trading conditions continued over the summer and had a noticeable impact on the holiday period. This continued in Q3 where total system sales were up 2.6% on Q3 2010 at CHF 3.43m. Additionally, attracting new franchise candidates to the business proved slower than originally expected and there had also been delays in the conversion of the second Pizza Taxi store from the Pagonia acquisition. Following a review, the Directors decided not to convert the third Pizza Taxi store and terminated the franchise agreement. Overall, Q3 like-for-like corporate sales were fractionally down (0.6%) on Q3 2010 at CHF 3.27m. As expected trading conditions for Q4 in the West remained demanding as the Group continued to see the impact of the strong Swiss Franc. However, this was offset by relatively strong growth in the East with double digit like-for-like corporate sales.

For the 12 month period, the cost of sales rose 4.9% to CHF 3.96m (2010: CHF 3.77m), largely due to an increase in food costs. This resulted in a gross profit for the year of CHF 10.49m (2010: CHF 10.01m). Staff costs for the year were down 1.57% to CHF 7.53m (2010: CHF 7.65m) but administrative expenses, excluding depreciation and amortisation, of CHF 4.96m were up 26% on 2010. The increase in administrative expenses was largely due increases in professional fees and expenses associated with the Austrian opportunity. In addition, the Directors decided to write off CHF 0.48m of investments associated with the Pagonia acquisition. Consequently, the depreciation charge for the year was significantly higher than in previous years, amounting to CHF 1.23m (2010: CHF 0.5m).

As a result, the Group reported a net loss from operations before financial result for the year of CHF 3.23m (2010 loss: CHF 2.05m). In view of the demerger and the fact that the carried forward losses of the Group are mainly within the demerged operating subsidiary, DPS, the Directors also resolved to write-off the deferred tax asset balance which amounted CHF 1.07m at the start of the financial year (see notes 12 and 17) and which is shown as 'Income Taxes' in the Consolidated Income Statement. It should be recognised that while the Group is fully taxable in Luxembourg and Switzerland on profits realised from its operations, there were no taxable profits attributable in either country in 2010 and 2011. There was no taxation charge in Switzerland because the Group has incurred tax losses there. While the taxable profits attributable to Luxembourg company amounted to CHF 854k in 2011 (2010: CHF 0), as a result of the transfer of the master franchise agreement (see below), these profits can be offset against the tax losses brought forward from previous years. 

Following these charges, the Group reported a net loss for the year of CHF 4.32m (2010 loss: CHF 1.67m).

Further, in relation to the demerger, the Domino's Pizza master franchise agreement was sold by the Company to DPS. The price was established using a discounted cash flow model and the valuation was reviewed and found to be reasonable by the company's auditors. This led to a revaluation of the Group's intangible fixed assets resulting in profit of CHF 2.5m (see note 13) which was attributed to the revaluation reserve. This is reflected in the Statement of Comprehensive Income, which showed a total comprehensive loss for the year of CHF 1.79m (2010 loss: CHF 1.67m), as well as in the revaluation reserve in the Consolidated Balance Sheet.

At 31 December 2011, current liabilities, including provisions, of the Group exceeded its current assets by CHF 3.49m (2010: CHF 1.77m).

As previously announced, the Group was unable to raise additional funding to support the expansion of the Group's pizza business into Austria during Q4. The Board had believed that the Austrian market would have provided an opportunity to deliver growth whilst leveraging the Company's central overhead and reducing the net cost of the opportunity in Switzerland. As a consequence, on 1 December 2011, Global Brands announced that it intended seeking shareholder approval for the cancellation of the admission of its ordinary shares to trading on AIM.

Following this announcement, Global Brands was approached by several parties who expressed an interest in preserving the listed company as a vehicle for other transactions. On 16 December 2011, after studying the feasibility of such a restructuring, the Board announced that it had decided to pursue the demerger option, subject to shareholder approval.

On 20 December 2011, Global Brands sent a circular to shareholders proposing:

·; a demerger of the pizza business which essentially involved transferring all the assets and liabilities, from Global Brands into DPS. The demerger would result in shareholders holding shares in two distinct entities with separate strategic, capital and economic characteristics and management teams;

·; Global Brands would become an Investing Company which would target investment opportunities in line with the Investing Policy; and

·; DPS would own the Master Franchise Agreement for Domino's Pizza in Switzerland, Luxembourg and Lichtenstein and would carry on the pizza business as a private company.

·; a capital restructuring to reduce the nominal value of the shares from CHF 0.02 to CHF 0.002 in order for the Company to be able to issue new shares at a price above the nominal value; and

·; a new investing policy.

In order to support the immediate working capital requirements of the pizza trading business, the Group raised additional capital in December 2011 amounting to CHF 756,000 gross though a placing of 37,800,000 new shares at a price of CHF 0.02 per share.

2. Post Balance Sheet events

On 3 January 2012, the Company implemented a 1 for 10 share split, which reduced the nominal value of the shares from CHF 0.02 to CHF 0.002 and increased the total number of ordinary shares in issue to 2,419,737,180.

On 17 February 2012, a total of 2,310,987,180 ordinary shares of CHF 0.002 were cancelled as a result of the reductions in capital of which:

1) 1,019,266,500 ordinary shares were cancelled through the capital reduction to offset the accumulated losses of CHF 6,000,144, and

2) The Company demerged its pizza business via the distribution of shares in DPS to the Company's shareholders on a one-for-one basis. A further 1,291,720,680 ordinary shares were cancelled through the reduction of capital 'in specie' pursuant to the demerger. Global Brands shareholders on the register as at 18:00 on 16 February 2012 received one DPS share for every Global Brands share held and received one Global Brands warrant for every 10 shares held in Global Brands. These warrants are exercisable at a price of £0.002 and expire on 17 August 2012.

Following the demerger, the total number of ordinary shares of CHF 0.002 in issue was 108,750,000.

On 18 February 2011, Alexander David Securities Limited, the Company's broker, converted accrued fees of £79,272.36 into 39,636,180 new ordinary shares at a price of £0.002. In addition, in order to support the Company's working capital requirements, the Company raised a further £70,000 through the issue of 35,000,000 new ordinary shares at a price of £0.002.

The Company has also issued further ordinary shares in relation to the exercise of warrants on 23 March 2012, 3 May 2012, 18 May 2012 and 27 May 2012. The total number of new shares issued in relation to the exercise of warrants amounts to 3,077,801 ordinary shares raising an additional £6,155.65. The total number of shares in issue as at today's date is 186,463,981 ordinary shares.

3. Deferred tax asset

As a result of the demerger and the fact that the carried forward losses of the Group are mainly in the Group's demerged operating subsidiary, Domino's Pizza Switzerland AG, the Directors resolved to write-off the deferred tax asset of CHF 1,074,085 (see note 16). The deferred tax asset represents 21% of the pre tax losses for 2009 and 2010. The net effect is a charge to the 2011 profit and loss account of CHF 1.07m.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2011

\* The notes 1 to 30 form an integral part of the financial statements and readers should refer to the full Annual Report.

STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

As at 31 December 2011

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2011

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY