Strathfield on profit track with franchise model

By Adam Coleman

SYDNEY: Strathfield Group has revealed it is on track to deliver a small profit for the six months to June 2006 and expects to reap significant financial benefits from changes to its franchise model.

In a statement to the ASX, Strathfield said it is on track to deliver a small earnings before interest, tax, depreciation and amortisation (EBITDA) profit for the period, compared to the EBITDA loss of $11.3 million for the same period last year.

Last year’s loss included a provision for the Cavastowe receivable of $2.85 million. Cavastowe being the company linked to former founder, Andrew Kelly.

Strathfield has also completed all documentation in relation to its franchise program and completed agreements with four franchisees, who are expected to begin operating on 1 July.

The company suggested it also has many parties interested in the franchises and are currently holding a number of security deposits.

“Strathfield expects to have a significant number of these additional stores franchised by December and to reap significant financial benefits from the change to the franchise model.”

It was back in March the company said it would franchise 62 of its 87 stores and the company’s expectations were that the model could produce an annual cash profit of more than $10 million when fully operational.

“To secure the ongoing reconstruction of Strathfield whilst moving as quickly as possible to franchising, the board has had agreed to accept funding from Warwick Mirzikinian and George Cheihk, directors of the company,” the statement said.

The funding is by way of a $3.1m working capital note facility for six months in the form of stock drawdowns and gaurantees.

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