Cape Town - O`Hagans Investment Holdings, the pub and restaurant
franchiser, reeled on the JSE yesterday after its auditors warned of
"significant doubts about the company`s ability to continue as a going
concern" following significant losses in the six months to March 31.
The share plummeted almost 35 percent to a new low of 17c, with 148 000
shares traded.
O``Hagan``s, which listed in 1997, notched up an interim loss of R17,9
million, or 40,7c a share, after the company``s rapid expansion through
acquisition last year. Turnover topped R42 million but trading margins were
shredded to leave an operating loss of R17,5 million.
Shareholders were warned that O``Hagan``s was unlikely to show a full profit
for the full financial year to September 30.
Basil O``Hagan, the chairman and controlling shareholder, remained upbeat
about the company``s restructuring effort.
"We are having ... meetings with our financiers, and it looks like most of
them want to come in. We will be converting our debt to equity and have a
couple of equity partners in the wings."
He indicated the company had hired the business recovery division of
PricewaterhouseCoopers to implement a turnaround plan.
"We will turn the company around. I am determined to do this, and have the
help of a dedicated management team."
O``Hagan said the company``s financial woes stemmed mainly from a cash flow
problem.
"We have good brands like O``Hagan``s Pub and Grill, Barons and Guiseppes,
and we are going to refocus on these core businesses. We will probably sell
off some other brands."
He said the company``s Mabaleng Sports Tavern was negotiating a merger with
Baby Jake``s Diners with a view to listing the enlarged company on the
Venture Capital market in September.
Plans to develop the O``Hagan``s brand internationally would continue on a
more conservative roll-out plan. Future strategy would favour franchised
outlets.
Deloitte & Touche, O``Hagan``s auditors, said the company``s existence
depended on the successful outcome of negotiations around its finance
facilities.
O``Hagan``s has entered into finance and operating lease commitments with a
R14,35 million short-term portion and an R81 million long-term portion.
According to the company``s balance sheet, net current liabilities had grown
to R16,4 million in the interim period from R1,7 million on September 30
last year.