Allied Brands in turmoil as CEO sacked following profit downgrade
Allied Brands, which operates franchised chains including the retail chain Villa & Hut, the ice cream chain Baskin and Robbins, food chain Cookie Man, and Awesome Water and Awesome Entertainment, says it now expects to post a loss of $10 million for 2010-11, after it was force to write down the value of certain brands by $13-15 million.
Underlying profit will be about $5 million before the write down of carrying values, compared with previous guidance of between $6.6-7.2 million.
Additionally, this morning the company announced that Radbone's position as chief executive has been terminated. This comes just two months after director and company secretary Jury Wowk stepped down for his role on April 15.
A number of Allied Brands' divisions are now under review.
The company said Awesome Water and Awesome Entertainment's funding arrangements would not allow an "appropriate level of affordability and said several options are being considered for these two companies, including refinancing and the divestment of Awesome Entertainment.
Additionally, the Kenny's business will be restructured with as many as 15 store reductions out of 46, with Allied Brands saying it will look for "suitable offers for this business". It also said it will need to adjust the goodwill carrying values of the Kenny's brand.
However, the company also said its Baskin and Robbins ice cream chain "continues to perform strongly".
The company also said there will be no material changes to the Villa & Hut and Cookie Man brands.
However, sources say the founder of Villa & Hut, Franz Madlener is considering ways to regain control of his business in light of the provide downgrade and the sacking of the CEO.
Madlender sold to Allied Brands last June for $2.8 million but refused to comment when contacted by SmartCompany.
Sources also expect a number of senior management changes to be announced soon, along with the restructure of some of the company's brands.
According to its latest financial results, the company recorded $31 million in revenue for the six months ending December 31, 2009, with a net profit after tax of $1.8 million. This was an increase from $1.6 million during the previous corresponding period.
Chief financial officer Sean Corbin will take over Radbone's responsibilities while the board "considers its options".
Corbin was contacted for comment this morning, but no reply was received before publication.
The turmoil comes after Allied Brands secured nearly $4.9 million in funding from a New York investment group in order to grow its franchise services division. The funds, from SpringTree Global Investors, were designed to create a division assisting franchise or companies wanting to move into franchising.
The market appears to have endorsed the news of the management changes and write downs: shares in the company have risen by 5.56% today to 3.8c, following a trading halt late last week.