CORPORATE INFORMATION 7 SUMMARY OF THE …€¦ · Food Emporium International Limited 3 Contents...

Food Emporium International Limited 3

ContentsIMPORTANT NOTICE 5

INDICATIVE TIMETABLE 6

CORPORATE INFORMATION 7

SUMMARY OF THE PRIVATE PLACEMENT 8

DIRECTORS AND OTHER PARTIES TO THE PLACEMENT 9

CHAIRMAN’S LETTER 12Outlook of the Nigerian Economy 12Impact on the Quick Service Restaurant (QSR) Industry 14

ABOUT FOOD EMPORIUM INTERNATIONAL LIMITED 15History and Background 15Business of the Company 15Outlets 15

SERVICE OFFERINGS 16

DIRECTORS 17Senior Management 18

THE OFFER 19Analysis of the QSR Industry 19Key Buyer Values 20Key Players and Market Size Analysis 20Industry Characteristics 21Key Success Factors 22Industry Challenges 23Industry Outlook 23Risk and Mitigating Factors 24Business Positioning Strategy 24

HISTORICAL FINANCIAL SUMMARY 26

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 27

BALANCE SHEET 28

PROFIT AND LOSS ACCOUNT 29

STATEMENT OF CASH FLOWS 30

Food Emporium International Limited4

NOTES TO THE ACCOUNTS 31

FINANCIAL FORECAST 34Letter from the Reporting Accountants 34

BASIS AND ASSUMPTIONS FOR THE FINANCIAL FORECAST 35

PROFIT FORECAST 36

LETTER FROM THE FINANCIAL ADVISERS 37

STATUTORY AND GENERAL INFORMATION 38Incorporation and Share Capital history 38Shareholding Structure 38

DIRECTORS’ BENEFICIAL INTERESTS 39Investments and Subsidiaries 39Claims and Litigation 39Other Disclosures 39Extracts From Memorandum and Articles of Association 41

DECLARATIONS AND CONSENTS 42

DOCUMENTS AVAILABLE FOR INSPECTION 43

PROCEDURE FOR APPLICATION AND ALLOTMENT 44

APPLICATION FORM 45

INSTRUCTIONS FOR COMPLETING THE APPLICATION FORM 47

Barcelos foto 2


Important Notice

The Directors of Food Emporium Interna-tional Limited (“the Company” or “FEIL”)whose names appear in this document acceptresponsibility for information contained inthis document. To the best of the knowledgeand belief of the Directors (who have takenall reasonable care to ensure that such is thecase), the information contained in this docu-ment for which they are respectively respon-sible is in accordance with the facts and doesnot omit anything likely to affect the importof such information.

The distribution of this document and theoffering of shares in certain jurisdictions maybe restricted by law. This document does notconstitute an offer, and may not be used forthe purpose of an offer to, or solicitation by,anyone in any jurisdiction in any circum-stances in which such offer or solicitation isnot authorized or lawful.

The shares are offered on the basis of the in-formation and representations contained inthis Private Placement Memorandum (“PPM”)and other documents referred to therein. Anyfurther information given or representationsmade by any person may not be relied uponas having been authorized by Food Empo-rium International Limited.

Please note that neither the Company, its Di-rectors, its Shareholders, Affiliates nor Advis-ers make any representations or warrantieswith regard to the accuracy or completenessof the information contained in this memo-randum. Persons interested in acquiringshares in Food Emporium International Lim-ited should do so after due and careful en-quiry into the affairs of the Company. How-ever, having made all responsible enquires,the Financial Advisers do confirm that to thebest of their knowledge and belief, this Pri-vate Placement Memorandum constitutes afair disclosure of all material facts about FoodEmporium International Limited.

Whilst the Directors are desirous of listing theshares of the Company on the floor of the Ni-gerian Stock Exchange (“NSE”) by introduc-tion before the end of year 2009, it is perti-nent to note that no official application hasbeen made to the Securities and ExchangeCommission for the clearance of this PrivatePlacement memorandum or the NSE for theadmission of the existing shares of Food Em-porium International Limited as well as theshares now being offered by way of PrivatePlacement.


Date Activity Responsibility

19/09/08 Completion Board Meeting FEIL

22/09/08 Application List opens Financial Advisers

03/10/08 Application List closes Financial Advisers

09/10/08 Collate results & Prepare allotment proposal Financial Advisers

13/10/08 Forward allotment proposal to FEIL Financial Advisers

17/10/08 Approval of allotment FEIL

24/10/08 Disburse net proceeds to FEIL Financial Advisers

28/10/08 Return surplus monies/rejected application Financial Advisers

21/11/08 Dispatch share certificates Company Secretary

Indicative Timetable


Corporate Information

Directors Sobowale Onasanya (Chairman)

Edward Akerele (Managing Director)

Daniel Awani (Executive Director)

Ebisan RewaneTunde OkoturoDere OtubuKunle ShokunbiDapo OyewumiKonstantinos Mazzis

Company Secretary Rook & Co(5th Floor)18 Moloney Street OnikanLagos

Registered Office 66 Isaac John StreetG.R.A. IkejaLagos

Solicitors Rook & Co(5th Floor) 18 Moloney StreetOnikan Lagos

Joint Auditors AO & A Audit(Chartered Accountants)11 Oba Akinjobi StreetG.R.A. Ikeja Lagos

Ijewere & Company(Chartered Accountants)(1st Floor) 106/110 Lewis Street Lagos

Bankers Zenith Bank PLCPlot 87 Ajose Adeogun StreetVictoria IslandLagos

Access Bank PlcPlot 1665 Oyin Jolayemi StreetVictoria IslandLagos


Summary Of The Private Placement

Issuer: Food Emporium International Limited

Lead Financial Advisers: Cordros Capital LimitedStacoprime Capital Limited

Joint Financial Adviser: F&C Securities Limited

Share Capital:Authorised N1,000,000,000 comprising 2,000,000,000 ordinary shares

of 50k eachIssued N710,000,000 comprising 1,420,000,000 ordinary shares of

50k eachPresently Offered N150,000,000 comprising 300,000,000 ordinary shares of

50k each

Placement Objective: The funds raised will be utilized for the following purposes:·Opening of new outletsAcquisition of up to date I.T infrastructure and systems·Working CapitalLiquidation of existing debt

Method of Offer: Private Placement

Units of Sale: Minimum of 1,000,000 shares and multiples of 500,000shares thereafter

Placement Price: N2.50 per share

Placement Size: N750,000,000

Placement Terms The said shares shall be ordinary shares and will rank equallyin all respects with all other issued ordinary shares of FoodEmporium International Limited including voting rights andother rights associated thereto.

Payment Terms: In full on Application

Period of Application: 22 September, 2008 – 3 October, 2008

Underwriting: At the instance of the issuer this placement will not beunderwritten.

Liquidity & Exit options The Company intends to list its shares on the floor of TheNigerian Stock Exchange in the year 2009.


Directors and Other Parties to thePlacementChairman Sobowale Onasanya

53 Lawson Street Lagos

Directors Edward Akerele1c Akilo RoadOgbaIkejaLagos

Daniel Awani1c Akilo Road OgbaIkejaLagos

Ebisan Rewane1626A Saka Jojo StreetVictoria IslandLagos

Tunde Okoturo1626A Saka Jojo StreetVictoria IslandLagos

Dere Otubu146 Amodu Ojikutu StreetVictoria IslandLagos

Kunle Sokunbi48B Joel Ogunnaike StreetIkejaLagos

Dapo Oyewumi12 Berkeley StreetOnikanLagos

Konstantinos Mazzis1c Akilo RoadOgbaIkejaLagos


Company Secretary Rook & Co(5th Floor) 18 Moloney StreetOnikanLagos

Joint Auditors AO & A Audit(Chartered Accountants)11 Oba Akinjobi StreetG.R.A. Ikeja Lagos

Ijewere & Company(Chartered Accountants)(1st Floor) 106/110 Lewis StreetLagos

Solicitors to the Company Rook & Co(5th Floor) 18 Moloney StreetOnikanLagos

Lead Financial Advisers Cordros Capital Limited16 Amodu Ojikutu StreetVictoria IslandLagos

Stacoprime Capital LimitedPlot 1681 Olakunle Bakare StreetVictoria IslandLagos

Joint Financial Adviser F&C Securities Limited13 Alhaji Ribadu StreetIkoyiLagos

Solicitors to the Placement Mbanugo Udenze & Co(2nd Floor) 13 Okesuna StreetLagos

Reporting Accountants S.I.A.O18B Temple RoadIkoyiLagos

Registrars United Securities Limited(5th Floor) 1/5 Odunlami StreetLagos


Receiving Banks Zenith Bank PLCPlot 87 Ajose Adeogun StreetVictoria IslandLagos

Access Bank PlcPlot 1665 Oyin Jolayemi StreetVictoria IslandLagos


Chairman’s LetterOutlined below is the text of the letter received by the Financial Advisers from Mr SobowaleOnasanya, the Chairman of Food Emporium International Limited.

12 September 2008

The Managing Director The Managing Director The Managing DirectorCordros Capital Limited Stacoprime Capital Limited F&C Securities Limited16 Amodu Ojikutu Street Plot 1681 Olakunle Bakare Street 13 Alhaji Ribadu StreetVictoria Island Victoria Island IkoyiLagos Lagos Lagos

Dear Sirs

Food Emporium International Limited’s Private Placement of300,000,000 Ordinary Shares of 50 Kobo each at N2.50 per Share

On behalf of the Directors of the Company, I am pleased to provide the following informationin connection with the Private Placement of 300,000,000 Ordinary Shares of the Company atN2.50 per share.

Outlook of the Nigerian Economy

The Nigerian economy has recorded impressive economic performance indicators. This islargely due to the successful transition of one civilian government to another as well as thecurrent rating initiatives/reports from the international rating agencies, Fitch and Standard &Poors. The GDP growth rate which was 1.9% in 1999 rose to about 7.01% by 2007 (1990 con-stant prices), with contributions from the non-oil sector increasing from 4.37% in 1999 to9.8% in 2007. Annual growth rates in various non-oil sectors improved between 1999 and2007; agriculture improved from 5.28% to 7.67%, telecommunications tremendously improvedfrom 5.39% to 32.85%, while manufacturing improved from 3.44% to 9.9% in 2007.

Developments in other macro economic variables have been encouraging. Inflation has sta-bilized, standing at 6.6% by the end of 2007. During this period, Nigeria’s external foreigndebt which was US$20 billion at the end of 2005 reduced to US$3.397 billion, upon the finalpayoff to the Paris Club of creditors as well as the London Club Par Bonds in 2006. Externalreserve which was US$3 billion in 1999 rose to about US$54.22 billion as at January 2008.These positive changes are largely due to recent favourable oil prices.

Gross Domestic Product

At the end of 2007, Nigeria recorded a Gross Domestic Product (GDP) of US$176.23 billion.This was an estimated 5.6% increase in nomimal terms from the previous year’s performanceof US$143 billion. Real GDP growth rate was estimated at 7.01% for the year against the 5.63%recorded in the preceding year. The non-oil GDP recorded growth rate of 9.8% as against8.59% recorded in the preceding year, while oil GDP growth rate recorded a decline rate of


5.1% as against a decline rate of 4.51% recorded in the preceding year. The non-oil GDP growthrate was driven by growth in agriculture – 7.6%; solid minerals – 10.51%, manufacturing –9.9%, and telecommunication – 32.85% while the lingering crisis in Niger Delta area of thecountry accounted for the decline in the oil GDP. The GDP per capita is currently estimated atUS$1,370.

The table below shows Nigeria’s real GDP trend for the past 5 years:

Desccription 2007 2006 2005 2004 2003 2002

Real GDP Growth (%) 7.01 5.63 6.51 6.58 9.57 4.63Oil and Gas Sector (%) (5.1) (4.67) 0.50 3.30 23.90 5.23Non Oil Sector (%) 9.8 8.93 8.59 7.76 5.17 8.27Table 1: Growth trend in GDP

Federal Government Revenue and Expenditure

The total revenue collected by the Federal Government in 2007 was estimated about N7 tril-lion. This represented an increase of 20% over the 2006 figure. The improvement in perform-ance is attributable to the favourable international crude oil pricing, which was consistentlyhigher than the budget benchmark price of USD30.00 per barrel. However, the economyexperienced a fiscal deficit of N101.3 billion during this period; a 6% decrease from the previ-ous period’s deficit of N161.4 billion representing 1.1% of the GDP for the same year. Thestock of public debt at the end of September 2007 declined to N440.7 billion from the previ-ous year of N451.1 billion.

Money Supply, Inflation and Interest Rates

The broad money (M2) grew by 10.8% at the end of June 2007 over December 2006. The in-crease in M2 was driven largely by foreign assets (net) of the banking system, which increasedby 15.2% as at June 2007, compared with 13.0% in the preceding quarter. The narrow money(M1) increased by 2.9% in June 2007 compared with 4.8% in March 2007. Aggregate domesticcredit (net) declined by 63.7% and 37.2% in March and June 2007 respectively, due mainly tothe decline in credit to government (net) by 50.6% at the end of June 2007. On the otherhand, credit to the private sector rose by 17.1% and 24.8% in March and June, respectively.The improvement in credit to the private sector reflected the positive impact of banking con-solidation and the moderation in the lending rate.

The Central Bank of Nigeria recently took steps to positively influence the cost of borrowingfor private sector investors by replacing its Marginal Rediscount Rate (MRR) with the Mon-etary Policy Rate (MPR). With the implementation of the new Monetary Policy Rate (MPR) andthe adoption of the CBN standing facilities, volatility in inter-bank rates remained subduedwith rates hovering within the MPR. The MPR was reviewed thrice during the year. The firstwas in June 2007 when it was reviewed downward by 200 basis points, from 10.0% to 8.0%,with the width of the interest rate corridor reduced from +/- 300 to +/- 250 basis points. Thesecond was in October 2007 when the MPR was raised by 100 basis points, from 8.0% to 9.0%,


with the interest rate corridor removed, in response to anticipated changes in economic andfinancial conditions. The MPR was then made to serve as the overnight (repo) rate. The lastwas in December 2007 when the MPR was increased by 50 basis points, from 9.0% to 9.5%.The current MPR stands at 10.25% p.a.

The year-on-year inflation figure stood at 6.6% while the 12-month average stood at 5.4% asat December 2007. The economy achieved the single digit inflation figure, not higher than8% projected for the year due to the appreciation in the value of the Naira against the USD,being N128:$1 in 2007 and N118:$1in 2008, the improvement in other economic variables inthe economy and the proactive measures the Central Bank of Nigeria adopted to manageliquidity in the financial sector.

The rapid growth of the Nigerian economy has witnessed the influx of multinational compa-nies into all sectors of the economy, the growth of local companies and the establishment ofnew companies. This has led to a significant growth of the middle income group and thesalary levels of same and hence disposable income.

Impact on the Quick Service Restaurant (QSR) Industry

Increase in economic activity means that a lot more of the country’s population will beengaged in more demanding economic activities. This translates into more time spentoutside the homes and increases the patronage of restaurants.

Absence of alternative leisure outlets, in sufficient numbers, like cinema, recreation spots,means that the average Nigerian family sees outings to quick service restaurants as arecreation activity.

It is estimated that about 70% of the Nigerian population is made up of young peopleaged between 19 and 42 years. A significant proportion of this economically viable popu-lation resides in one of eleven identified major population clusters in Nigeria. These loca-tions are also the main commercial centers in Nigeria. The absence of budget restaurantsin the main business districts in Lagos and the other commercial centers in Nigeria cre-ates demand for fast food.

The number of players in the industry and the number of restaurants relative to the popu-lation of Nigeria supports the case for expansion of existing quick service restaurants.

Increase in purchasing power on the back of growth in economic activity will lead toincreased patronage of QSRs.


About Food Emporium InternationalLimitedHistory and Background

Food Emporium International Limited was incorporated in 2002 Nigeria, under the Compa-nies and Allied Matters Act of 1990, as a limited liability company. The Company’s registrationnumber is R.C. 439852. The Company was setup with the aim of replicating the success ofImperium Franchise Holdings International Limited (in South Africa) in Nigeria and West Af-rica.

Business of the Company

To carry on the business of operating the Barcelos flamed chicken franchise, including fishfryer, pizza den, griddles flamed burgers, creamy fiesta, mama’s bakery and all matters ancil-lary and incidental to the business in Nigeria and West Africa.

Outlets

Existing

S/N Location Outlet Address Year Opened

1 Lagos, Nigeria Ikeja Isaac John Street, GRA, Ikeja 20032 Lagos, Nigeria Silverbird Ahmadu Bello Way, V/Island 20053 Lagos, Nigeria City Mall City Mall, Onikan 20064 Abuja, Nigeria Ceddi Plaza Adetokunbo Ademola Street, Abuja 20075 Lagos, Nigeria Festac 21 Road, Festac Town 20076 Lagos, Nigeria Airport MMA2, Domestic Airport, Ikeja 20087 Accra, Ghana Shoprite Shoprite Shopping Mall, Accra 2008

Proposed

S/N Outlet Location Year of Opening

1 Opebi Nigeria 20082 Enugu Nigeria 20083 Isolo Nigeria 20084 Warri Nigeria 20095 Port Novo Benin 20096 Benin Nigeria 20097 Banjul Gambia 20098 Port Harcourt Nigeria 20099 Ibadan Nigeria 200910 Asaba Nigeria 200911 Abeokuta Nigeria 200912 Freetown Sierra Leone 2009


Service Offerings

Existing Products

Barcelos: Chicken & Beef BurgersChicken & BeefKebabsChicken & Beef Stir FryChicken, Beef & Vegetable ShawarmasToasted SandwichesPrego Rolls, Fries & QuattrosFried, Jollof & Spicy RiceChicken, Classic & Garden Salads

Mama’s Bakery: Pita & French BreadBaguettes & CroissantFairy, Maderia & Sponge CakesMeat & chicken PiesScones, Doughnuts & Rolls

Creamy Fiesta Waffles, Dips, Sundaes & MilkshakesVariety of Ice Creams

Pizza Den Variety of Pizzas

Future ProductsCombos, Wraps & Salad BarBrown Bread, Fresh Sandwiches & Airline MealsPizza Slices & Choice of different bases


Food Emporium International Limited has anine (9) member Board of Directors. The Di-rectors are charged with the responsibility offormulating policy guidelines to be imple-mented by the Management. The followingare brief profiles of the members of the Boardas currently constituted:

Mr. Sobowale Onasanya (Chairman)

A graduate of Pharmacy from the UniversityOf Ife, he also holds an MBA from the Univer-sity of Lagos. He is a member of the Pharma-ceutical Society of Nigeria. He is currently theManaging Director of Biochemical DerivativesLimited. He also sits on the Board of othercompanies which include S. S. Skot & Co. Ltd,Bola Chemists Ltd, Edmund and Marci Ltd andOceandrive Foods Ltd.

Mr. Edward Akerele (Managing Director)

A graduate of Economics from The City Uni-versity London, he also holds an MBA from thesame university. He is an ex banker of 26 yearsexperience. He worked in major MultinationalBanks amongst which were Grindlays Bankand Stanbic Bank. He was formerly the MD/CEO of Ecofin Financial Markets Ltd. He alsosits on the board of the following companies,Amana Capital Pension Ltd, and Cardtec Sys-tems Ltd. He is an alumnus of the prestigiousColumbia Business School-NY, and is also aPast President of the Apapa Club.

Mr. Daniel Awani (Executive Director – Finance)

He is an Accounting graduate of University OfLagos and London School of Accountancy. AChartered Accountant with post qualificationexperience of over 23yrs within Nigeria andoverseas. Started work with Akintola Williams& co, Chartered Accountants, before movinginto the food manufacturing sector. Heworked with the subsidiaries of the US basedmultinational Seaboard Corporation, as expa-

Directors

triate Financial Director/ Deputy Chief Execu-tive Officer in Lesotho and Sierra Leone Flourmilling companies. Prior to this, he worked asthe Group Finance Director of the NigerianSeaboard operations.

Mr. Ebisan RewaneHe is an Economics graduate from the Uni-versity Of Ife. He worked at Life Flour Mill Ltdfrom 1985 till 2001 rising to the position ofExecutive Director (Group Liaison & BankingOperations). He sits on the board of numer-ous companies namely Alfred George Nig.Ltd, Alfred George Marine and Oil ServicesInternational Ltd, AG Foods Nig. Ltd, PlatinumFoods Nig. Ltd, Life Flour Mill Ltd, TopfeedsLtd, Delta Packaging Co, SEEPC Nig. Ltd,Rewane Investments Ltd, Warri Crumb Rub-ber Ltd and Senforce Insurance Brokers Ltd.He is presently the Chairman of the DeltaState Lawn Tennis Association.

Mr. Tunde OkoturoHe is an Economics graduate from the Uni-versity Of Buckingham. He worked for severalyears as an investment specialist and stock-broker with BCCI and later with CenterpointInvestment Ltd. He is a Fellow of the Char-tered Institute of Stockbrokers of Nigeria, andformer Managing Director of Shiroro FinanceLtd. He is a Venture capitalist, Investment Con-sultant and is presently the Managing Direc-tor of Alfred George Nig. Ltd. He sits on theboard of many companies amongst which areStaco Insurance Plc, Management Review Ltd,Oceandrive Foods Ltd, AG Foods Ltd and ECLAsset Management Co. Ltd.

Mr. Dere OtubuHe holds a Bachelors & Masters degree fromthe Houston Baptist University, USA. He iscurrently the Chairman of STACO InsurancePlc, SIC Property & Investment Company Lim-


ited and Executive Chairman of Senforce In-surance Brokers Limited. He is also a Directorof Access Bank Plc.

Mr. Kunle SokunbiHe is a 1978 graduate of Sociology – Univer-sity of Ibadan. He worked with HagemeyerNig Plc Limited for 12 years and left the com-pany as an Area Manager in 1991 to set uphis own private business. He is the Chairman/Chief Executive Officer of Kaylords Group ofCompanies, a thriving business with branchesin the western region of the country. He is welltraveled.

Mr. Dapo OyewumiHe is a law graduate from the University of Ife.He has considerable financial and bankingexperience spanning 27years in major banksin Nigeria. He is a member of several profes-sional bodies. He is a fellow of the Institute OfDirectors, and a member of the CompaniesDirection Committee. He is a certified media-tor and is currently an Executive Director andmember of the Board Of Governors of TheCentre For Law and Business, a teaching in-stitution for the University Of London Exter-nal Programme.

Mr. Konstantinos MazzisHe is Portuguese and the founder of theBarcelos Flamed Chicken and some brands inthe outlet. Presently, He is the Managing Di-rector of Imperium Franchise Holdings (Pty)Ltd South Africa. He has over 25 years experi-ence in the food business and is representingthe foreign technical partners in the company.

Senior Management

The profiles of FEIL key staff are as follows:

Mr. Derrick Van Houten (Operations Manager)

He has a B Comm. in Economics as well as anAdvanced Finance Diploma from the WittsBusiness School. His work experience spansover thirty years in the Banking, Automobileand Catering/Hospitality industries in SouthAfrica, in areas of sales, customer care, budgetmonitoring, cost control system develop-ment, key accounts management and projectManagement. He owned and managed asmall exclusive hotel in Constantia CapeTown, in 2002 before purchasing an Italianfranchise restaurant in 2004.

Mr. Adebayo Lawrence Ogunba(Finance Manager)

He is a Chartered Accountant with 8 years’post qualification experience. He graduatedfrom Yaba College of Technology, Yaba withan Upper Credit in Accountancy & Finance. Hiswork experience cuts across Audit, Bankingand the Pharmaceutical sector. He rosethrough the ranks to the position of Head ofAccounts & Administration. He has attendedvarious training programmes & seminars or-ganized by his institute and others to broadenhis horizon in his chosen discipline.


The Offer

Legal Basis for the Offer

At an Extra-ordinary General Meeting (EGM)of the Company held on 31 March, 2008shareholders of Food Emporium InternationalLimited passed the following resolutionswhich provide a legal basis for the Offer:

a. that the Directors of Food Emporium In-ternational Limited are hereby author-ized to increase the authorized sharecapital of the Company from 200 millionordinary shares of 50k each to 2 billionordinary shares of 50k each

b. that the Directors be and are authorizedto allot and issue shares of the Companyout of the authorized but unissuedshares at a price to be determined byexisting members and new memberswho may wish to acquire shares.

Purpose of the Offer

The main objective for the decision by theDirectors of Food Emporium InternationalLimited to raise additional funds through theissue of additional shares is to strategicallyreposition the Company to ensure it will suc-cessfully compete in the rapidly growing Ni-gerian QSR industry. Specifically, the fundsto be raised will be used for the following:

a. Acquire new outlets in selected locationsin Lagos and other key cities across thecountry

b. Equip new outlets with state-of-the-artequipment whilst upgrading existingoutlets

c. Develop and execute an aggressive mar-keting and advertising strategy

d. Liquidation of existing debte. Working Capital enhancementf. Enhancement of IT infrastructure

Number of Shares on Offer

The Company is offering by Private Placement300,000,000 Ordinary Shares to Institutionsand Individuals.

In the event of an oversubscription of theshares being offered during the private place-ment, directors may offer additional sharesfrom the unalloted shares of the company toprospective investors and or shareholdersmay offer part of their collective and indi-vidual shares by way of an offer for sale toaccomodate the oversubscription.

Price Per Share

The Directors have given approval for theshares on offer to be sold at N2.50 per share.The price per share is based on the valuationof the company carried out by the FinancialAdvisers.

Analysis of the QSR Industry

The Quick Service Restaurant (QSR) industryis made up of establishments engaged in thepreparation and sale of prepared and readyto eat foods. All customers have the optionof “eat-in” (consumption within the outlet) or“take away” (consumption outside the outlet).The menu items are expected to be fresh,tasty, affordable, easily packaged and servedwithin a short time.

The short waiting time forms one of the dis-tinct industry features. Otherwise known as“fast food restaurants”, the term “fast” con-notes “quick service”. Typically, customers ex-pect their orders to be ready within 7 minutes.Unlike the typical restaurant, quick servicerestaurants are less conservative as they beara casual and semi-formal ambience. The in-dustry comprises of both organized players(who are relatively large, professionally run


and have many outlets) and the unorganisedplayers (who are small in size and lack the pro-fessional “touch”).

Key Buyer Values

QSR customers can be classified into sixgroups as follows:

1. ChildrenThis group includes young children of allages. It is believed that a significant pro-portion of school children visit fast foodrestaurants twice weekly. Most custom-ers in this category purchase pastries, icecreams and other snacks from the out-lets. The key buyer values for this groupof customers include availability of chil-dren’s play area with bright colours andmusic, and a wide variety of snacks.

2. YouthThis group includes young adults agedbetween 18 and 22. They are mostly stu-dents and are conscious of the latest glo-bal trends. This group of customers willvisit “trendy” outlets where other cus-tomers of the same age group “hangout”. “Trendy” is defined by the currentsocial trends in the society. Most outletsattempt to satisfy this group of custom-ers by providing background music andpopular television channels like ChannelO and MTV. They tend to patronize QSRsmore in the evenings and on weekendswhen they “hang out” with their friends.Also events like Valentine’s Day, publicholidays draw a lot of them to QSRs. Icecreams, burgers and pastries appealmore to this age group.

3. AdultsProximity to place of work, quality ofmenu offering and variety of productsare the key demand drivers for this popu-lation segment. Breakfast tends to con-sist more of pastries whilst lunch islargely rice, French fries and chicken. This

group also tends to be price sensitive asthe purchases constitute a significantpercentage of their monthly spend onfood.

5. FamilyThe absence of adequate recreationalfacilities and location in the countrymeans that visits to QSRs are perceivedas leisure activities and recreational des-tinations for the family. Recent marketresearch also shows that during week-ends, public holidays and school holi-days outlets record increases in sales dueto a surge in patronage by families. Gen-erally the preference of children will in-fluence where the family goes out forrecreational activities.

6. ExpatriatesLagos and most of the major cities in thecountry have a large and growing expa-triate population. The increase in foreigninvestment in the last seven years led toan increase in the number of expatriatessent by their companies to “look after “in-vestments in Nigeria. Expatriates willpatronise international brands that retailsuch known products like burgers, piz-zas etc. Proximity to their residence playsa key role in deciding which QSR to pat-ronise.

Key Players and Market SizeAnalysis

The QSR industry is comprised of a few keyplayers and many small outlets scatteredacross the country. Although in its infancy,the industry is becoming very competitive.The competition is heightened because thereare no clear, discernable bases for differentia-tion except the quality of meals on offer. Thejudgment call regarding meal quality tendsto be very subjective and at times meal qual-ity fluctuates. The absence of internationalbrands with institutional quality control


standards also means that industry productscannot be monitored very strictly. The majorquick service restaurant players in the Nige-rian market are:

BarcelosBig TreatChicken RepublicMama CassMr. BiggsMunchiesSweet SensationTantalizersTastee Fried ChickenTetrazzini

We estimate the size of the quick service res-taurant market in Nigeria at about N60 billion.It is a high growth industry with 40% year onyear growth per annum over the next tenyears as the penetration rate of the QSRs in-creases. Using the five-stage industry life cy-cle analysis, analysts are of the opinion thatthe QSR industry is at stage II – the rapid ac-celerating growth rate stage. During thisstage, the products’ market develops at arapid pace with demand for the industry’sproduct growing considerably. This stage isalso characterised by low number of playersresulting in little competition between theplayers since all players are making substan-tial profits relative to their capital outlay. Assales grow, the industry builds its productivecapacity – in the QSR industry, productivecapacity growth will be through outlet expan-sion.

Industry Characteristics

The following describes the structure of thequick service restaurants industry in Nigeria:

1. Entry BarriersEntry barriers in the QSR industry are low. Thislow entry barrier is as a result of the follow-ing:

The capital required to open a typical fastfood outlet is less than N50million. Thishas led to a mushrooming of poorly con-ceived and managed players in the in-dustry. However a chain operator willrequire capital in excess of N500millionto meet a fast rollout objective.

The scope for product differentiation isvery low. Players compete not only onthe basis of brand superiority but onprice and proximity to the target market.

2. Substitute for other Leisure ProductsQSR restaurants in Nigeria are fast becomingalternative leisure outlets. There are very fewcinemas in Nigeria, no quality amusementparks where children can be taken for recrea-tional activities. It is not unusual for familiesto “go out” to QSR restaurants on Saturdaysand spend a couple of hours there. In re-sponse, the major players have added chil-dren play arena where birthday parties andother events can be organized to win marketshare.

3. Importance of LocationLocation is a critical success factor in the in-dustry. Outlets have to be strategically lo-cated to ensure accessibility to the targetmarket in order to generate high customertraffic. Consequently, the first player to locatean outlet in a neighborhood tends to enjoyfirst mover advantage. Potential new entrantshave to come up with new “tricks” like lowprices, superior menu etc to win market sharefrom established players.

4. High Degree of CompetitionWe see potential new entrants into the indus-try as the sector is gaining reputation as oneof the most attractive in the Nigerianeconomy. Low product differentiation meansthat competition to win customers will befought using price, brand image, proximity totarget market and advertising. The industry


is likely to witness major expansion on theback of capital raising embarked upon bymost of the major QSR players in Nigeria.

5. Quality of SuppliersThere are three major chicken suppliers inNigeria with capacity for 30,000 birds a day.It is doubtful if the capacity of these threepoultry farmers will meet the industry’s grow-ing demand for chicken. The suppliers ofother raw input are deeply fragmented. Mostof the vegetables come from the northernpart of Nigeria and is brought to Lagosthrough middlemen. Industry players mightneed to integrate backwards and create lo-gistics and supplies companies to assure qual-ity and consistency of raw material supplies.

Key Success Factors

The following factors determine demand forQSR products and are therefore critical to thesuccess of any brand:

1. Location of the OutletOutlets must be located in key commercialand/or residential areas. An outlet’s locationcontributes significantly to its success as thelocation determines the customer traffic. Aflagship location would also reduce the needfor major advertising campaigns. The firstbrand to locate outlets in key markets will alsoenjoy first mover advantages.

2. Fast RolloutTo achieve brand awareness, outlet ubiquityis critical. The brand with the highest numberof outlets and/or a quick roll out plan will bemore successful in building a strong marketbrand. Various costs such as advertising costsmay be spread between several outlets result-ing in significant cost savings.

3. Quick Service DeliveryAs the name implies “quick” is the watchwordin the industry. The meals served are pre-cooked or readily available on request. Cus-tomers expect to be served promptly withminimum delays.

4. BrandingBranding gives a player an edge over theother industry players because it creates anidentity and/or image. Customers’ perceptionof the brand is critical to the brand’s success.

5. Trained ManpowerThere must be continuous in-house and ex-ternal training suited to the needs of both theskilled and semi-skilled staff. Staff must becourteous, diligent and possess excellent in-terpersonal skills.

6. Excellent Customer ServiceSuperior customer service will distinguishsuccessful brands. The outlets must employexcellent staff that understand the value ofexcellent customer service. This strong cus-tomer service orientation will be constantlyreinforced by on-the-job training.

7. Product Quality StandardizationThis guarantees that at any of the brand’s out-let, the taste and quality of food and servicesrendered will be of the same standard at alltimes. Raw materials and their suppliers mustbe maintained as this has a direct bearing onthe quality and taste of the final products. Thebrand must make special effort to maintainor even improve the product quality overtime.

8. InnovationPlayers need to take into consideration cus-tomers’ judgment of their service. They mustalso be proactive in anticipating customers’future demands and position themselves tomeet such demands.


9. AmbienceCustomers expect the outlet environment tobe very clean. The interior design must beinviting, welcoming and relaxing such thatcustomers will keep coming back.

10. HygienePlayers must maintain high standards of hy-giene. This will prevent any case of food poi-soning, which will be detrimental to the im-age of the player.

11. Adaptation to Local palateThe products and services offered must besuited to the local market demand. Importedbrands and franchises must suit the menu onoffer to the local palate.

12. Organisational StructureControls must be put in place to avoid theftand maintain product quality. A lean and en-trepreneurial organization structure ensuresthat the interest of staff and that of the own-ers are closely aligned.

Industry Challenges

1. PilferingThis is a common occurrence in the industry.Members of staff steal raw materials and/orfinished food items. This has resulted in strin-gent control measures in the industry.

2. Poor Service cultureThe Nigerian service culture is underdevel-oped. This lack of professionalism is indus-try-wide. However, the attractiveness of theindustry has resulted in the proliferation ofmany small unprofessional players.

3. Underdeveloped TourismThe Nigerian tourism industry is underdevel-oped resulting in leisure being an uncommonpractice. This has a direct impact on the fastfood industry, as there is a positive correla-

tion between QSR customer traffic and tour-ism.

4. High Attrition levelsA large proportion of the industry’s staff issemi-skilled and do not regard their jobs aspermanent or as careers. For this reason, theindustry staff turnover is high. There is also ahigh incidence of poaching between brands.

5. WastageThe supplies and products of the industry areperishable in nature. The “longer-lasting”products have a maximum shelf life of 48 hrs.There is the tendency for wastage to occurwhere the risk of unsold products is not miti-gated.

Industry Outlook

Consumer Attitudes and TrendsConsumer attitudes change constantly andare influenced by factors i.e. age, income, life-style, household income to mention a few. Inrecent years, health factors have become anincreasingly important influence and one thatfast food operators have had to address. In thelight of this, it is anticipated that customerswill expect better products and services fromthe QSR players.

Economic CompetitionThe value of QSRs is directly affected by boththe entrance of new competitors in the catch-ment area and the entrance of new productsbeing produced by competitors. As playerscompete with each other to increase marketshare it is likely that price wars, innovation,new products and product differentiation willemerge. There is a strong likelihood of theentry of a number of world known foreignbrands into the Nigerian QSR in the near fu-ture.


Increase in Capital RequirementThe capital outlay to compete favourablywithin this industry is increasing very rapidly.Time and cost to completion of outlets is likelyto be a major challenge for the industry. Theefficient deployment of resources will be-come a major competitive advantage. As withmost growing industries we are likely to wit-ness more financing rounds taking placewithin the near future.

Risk and Mitigating Factors

1. Economic/Political RiskThe Company’s business can be adversely af-fected by economic and political conditionsprevailing in the country. The Nigerianeconomy and most of the other West Africancountries have achieved record year on yearlevels of economic growth and political sta-bility. Whilst this is expected to continue forsome years, it is not also unlikely that condi-tions may change.

Mitigating Effect – The Company hasthe exclusive franchise for the West Afri-can region. Its planned roll out in the re-gion will limit its exposure to market fluc-tuations in any one country.

2. Sector/Industry RiskThe company is likely to face stiff competitionfrom the existing key players and likely entryof foreign QSR brands into the country. Thethreat of other smaller players trying to en-croach on its market share could be a causefor concern.

Mitigating Effect – The Company hasestablished a niche based on its franchiseand plans to rapidly expand its opera-tions to enable it grow its market share.

3. Specific/CompanyThe Company’s business is built on the qual-ity of our people, food we serve, processesand service. To this end we rely heavily on ourpeople, infrastructure and processes. Oncethese are compromised we would lose ourreputation and the inherent qualities in ourbrand.

Mitigating Effect – The planned expan-sion has incorporated the need to moti-vate and retain our people and also notto compromise on the quality of infra-structure to be obtained.

Corporate Governance

The Board is highly committed towards en-suring that the Company undertakes its ac-tivities within the confines of law of the landand in accordance with global best practice.There exist adequate separation of powersbetween the Chairman of the Board and theManaging Director.

Business Positioning Strategy

Brand AppealThe Company will leverage on its brand ap-peal in reaching out to the emerging favour-able demographics of the population. TheCompany seeks to exploit its franchise on theback of the growth in lifestyle changes andincreased economic empowerment of thepopulation. The Company has engagedbranding specialists to assist in the promo-tions, events and brand marketing of its prod-ucts.


ExpansionThe expansion plan of the Company has beencarefully crafted and thought out so that theinherent values are not compromised. Therollout plan seeks to create a presence andopportunity for the Company’s outlets to bemore accessible to its growing clientele. TheCompany shall deploy state of the art equip-ment in the new outlets to be opened. It shallalso seek to upgrade the facilities in the exist-ing outlets.

Service DeliveryThe Company shall enforce strict adherenceto quality, service and cleanliness will be up-held at all times. A culture of service excel-lence which the brand is associated with willbe institutionalized. Operating standards willnot be compromised as procedural guide-lines to provide uniformity between outletswill be laid out.

OperationsThe Company intends to centralize purchas-ing, logistics and warehousing of all requiredinputs whilst maintaining a strong partner-ship with its suppliers. Backward and forwardintegration along the QSR value chainthrough operational partnerships with sup-pliers and service providers is being explored.

FinanceThe Company intends to have an optimalcapital structure. It intends to achieve this bymaintaining a suitable financing structurethat combines the right mix of debt, equityand internally generated cash at all times.

Cross Border InitiativeThe Company has the franchise for the WestAfrican region and has come up with a blue-print on its rollout plan that seeks to exploitthe emerging opportunities in the intendedcountries of operation.

ManpowerThe Company intends to grow its staff com-plement as it expands rapidly. It plans to re-cruit, train and retain its staff as it recognisesthat its performance is dependent on the tal-ents and efforts of these highly skilled indi-viduals. As the QSR industry becomes morecompetitive we believe that this in itself rep-resents a competitive advantage.


Historical Financial SummaryExtracts from the audited accounts for 2008 are presented below:Independent Auditors’ ReportAUDITORS’ REPORT TO THE MEMBERS OF FOOD EMPORIUMINTERNATIONAL LTDWe have audited the financial statements set out on pages 6 to 15 which have been preparedunder the historical cost convention, and in accordance with the accounting policies set outon page 9.

Respective Responsibilities of Directors and AuditorsAs described on pages, the Company’s Directors are responsible for the preparation of thefinancial statements which give a true and fair view of the state of the company as at 30thApril, 2008. It is our responsibility to form an independent opinion based on our audit ofthose statements and to report our opinion to you.

Basis of OpinionWe conducted our audit in accordance with accepted auditing standards and carried out anexamination and assessment of the significant estimates and judgments made by the direc-tors in the preparation of the financial statements.

We planned and performed our audit by carrying out such auditing procedures as we deemednecessary obtained all the information and explanations which we considered necessary toprovide us with sufficient evidence of reasonable assurance that the financial statements arefree from material misstatement, whether caused by fraud, error or other irregularities. Wealso evaluate the overall adequacy of the presentation of information in the financial state-ments and assessed whether the books of accounts of the company have been properly kept.

OpinionThe Balance sheet and Profit and Loss account on page 6 and 7 respectively are in agreementwith the book, which in our opinion, have been properly kept. We obtained the informationand explanations we required.

In our opinion, the financial statements give a true and fair view of the state of affairs of thecompany at 30th April, 2008 and of the results for the year ended on that date and have beenproperly prepared in accordance with the Companies and Allied Matters Act of 1990.

Lagos, Nigeria.


Statement of Significant AccountingPolicies1. Accounting PoliciesThe following summarises the significant accounting policies ap-

plied by the Company in arriving at the accompanying accounts which have been pre-pared on historical cost basis of accounting.

a. TurnoverTurnover represents sales to customers.

b. DepreciationFixed Assets are depreciated over their estimated useful lives by the straight line methodat the following annual rates and charged against the results of the operations for theperiod.

Assets by Classification Rates (%)Plant and Machinery 20Office/Shop Equipment 20Motor Vehicles 25Furniture and Fittings 20Leasehold Improvements 2

2. Accounting Responses to the Effects of InflationNo adjustments have been made inthe accounts for the effects of inflation and rising prices.

3. Deferred TaxationThe Company has not made any provision in these accounts for de-ferred taxation.

4. InventoriesInventories are stated at lower of cost or net realizable value. Cost deter-mined on the First-In-First-Out (FIFO) basis.

5. Foreign Exchange Transactionsa. Basis of ConversionTransactions in foreign currency are converted into Naira at the rates of exchange rulingon the dates of the particular transaction.

b. Basis of TranslationForeign currency items included in the Balance Sheet are translated at the rates ruling onthe Balance Sheet date.


Balance Sheet

2008 2007 2005N ‘000 N ‘000 N ‘000

12 months 16 months 12 months

Assets

Fixed Assets 24,000 35,262 37,435Preoperational Expenses 6,575 16,437 29,587Patents 30,637 30,637 30,637Current Assets 805,204 149,712 59,483Total Assets 866,416 232,048 157,142

LiabilitiesCreditors falling due within one year 124,995 20,274 34,509Taxation 17,067 10,072 6,672

142,062 30,346 41,181

Creditors falling due more than one yearTerm Loan 7,504 87,247 -

Share Capital 100,000 100,000 100,000Deposit for Shares 600,000 - -Directors Current Account - - 9,092Bonus Share 10,000 - -Profit and Loss Account 6,850 14,454 6,869Shareholders’ Funds 716,850 114,454 115,962Total Liabilities & Equity 866,416 232,048 157,143


Profit and Loss Account

2008 2007 2005N ‘000 N ‘000 N ‘000


Turnover 241,272 280,787 179,206Cost of Sales (137,959) (149,852) (88,117)Gross Profit 103,312 130,934 91,088Other Income 8,807 11,584 7,129Total Operating Income 112,119 142,518 98,218Expenses (85,426) (106,119) (65,631)Pre-operational Expenses (9,862) (13,150) (9,862)Interest Charges (7,035) (3,184) (1,879)Profit/(Loss) before Taxation 9,795 19,984 20,844Taxation (7,400) (3,400) (4,672)Profit/(Loss) after Taxation 2,395 16,584 16,172Dividend - (9,000) (8,000)Bonus Issue (10,000) - -Profit/(Loss) brought Forward 14,454 6,869 (1,302)Retained Profit carried to Balance Sheet 24,311 14,454 6,869


Statement of Cash Flows2008 2007 2005

N ‘000 N ‘000 N ‘00012 months 16 months 12 months

CashFlow from Operating ActivitiesProfit before Taxation 9,795 19,984 20,844

Adjustment for Non-Cash ItemsDepreciation 13,832 17,883 10,303Pre-operational Expenses 9,862 13,150 9,862

Operating profit before Working 33,491 51,017 41,010Capital changes

(Increase)/Decrease in:Intercompany Balances (54,766) (93,824) (3,188)Inventory 2,493 1,293 (2,209)Debtors & Prepayments (7,436) 598 (27,280)Creditors & Accruals 40,084 (15,955) 16,539Tax paid (405)

Net Cash flow from Operating Activities 13,461 (56,869) 24,871

Cash flow from Financing ActivitiesShare Capital - - -Deposit for shares 600,000 - -Dividend paid - (9,000) (8,000)Directors’ Advances - (9,092) -Term Loan (79,743) 87,247 -

Net Cash flow from Financing Activities 520,256 69,155 (8,000)

Cash flow from Investing ActivitiesPurchase of Fixed assets (2,571) (15,709) (3,424)Sale of Fixed assets - - (592)Patents - - (2,802)

Net Cash flow from Investing Activities (2,571) (15,709) (5,634)

Net Inflow/(Outflow) of Cash 531,147 (3,424) 11,236

FundBalance at 1st January 1,047 4,472 (6,763)

Balance at 30th April 532,195 1,047 4,472

Increase/(Decrease in Cash 531,147 (3,424) 11,236 & Short Term Funds


Notes to the Accounts

2008 2007 2005N ‘000 N ‘000 N ‘000

12 months 16 months 12 monthsFixed AssetsCost At 30 AprilLeasehold Improvements 12,322 12,322 11,683Motor Vehicles 3,475 3,475 3,475Plant & Machinery 35,775 35,567 25,414Office Equipment 21,564 20,179 16,928Furniture & Fittings 6,717 5,738 4,071

79,854 77,283 61,573

Depreciation At 30 AprilBuilding Improvements 1,159 913 584Motor Vehicles 3,474 2,700 1,541Plant & Machinery 28,810 21,655 12,170Office Equipment 17,524 13,211 7,830Furniture & Fittings 4,884 3,540 2,010

55,854 42,021 24,138

Net Book Value At 30 AprilBuilding Improvements 11,162 11,409 11,099Motor Vehicles 1 775 1,933Plant & Machinery 6,965 13,912 13,244Office Equipment 4,039 6,967 9,097Furniture & Fittings 1,833 2,197 2,061

24,000 35,262 37,435


2008 2007 2005N ‘000 N ‘000 N ‘000


Preoperational ExpensesBrought Forward 16,437 29,587 39,450Written off for the period (9,862) (13,150) (9,862)

6,575 16,437 29,587PatentsBrought Forward 30,637 30,637 30,637Additions - - -

30,637 30,637 30,637

Stock 5,180 7,673 8,967Debtors and Prepayments 45,011 37,575 38,174Inter-Company Balances 153,179 98,413 4,589

Cash and BankBank Balances 600,315 3,481 6,083Main Cash 1,467 2,284 1,431Petty Cash 49 282 237

Creditors & Accruals 55,358 15,273 31,229

TaxationBalance brought forward 10,072 6,672 2,000Provision for Income tax for the year 7,400 3,400 4,672Payment during the year (405) - -

17,067 10,072 6,672


2008 2007 2005N ‘000 N ‘000 N ‘000


Share CapitalAuthorised200,000,000 ordinary shares of 50 kobo each 100,000 100,000 50,000

100,000 100,000 100,000Issued and Fully paid200,000,000 ordinary shares of 50 kobo each 100,000 100,000 100,000

100,000 100,000 100,000

Finance CostsInterest on overdraft 7,035 3,184 816Interest 55 - -Bank Charges 2,658 4,741 1,062

9,748 7,925 1,879

Operating Expenses 89,923 102,148 65,631


Letter from the Reporting Accountants

Financial Forecast

September 09, 2008

THE MANAGING DIRECTOR THE MANAGING DIRECTORFood Emporium International Limited Cordros Capital Limited66, Isaac John Street, 16, Amodu Ojikutu Street, GRA, Ikeja Victoria IslandLagos. Lagos

THE MANAGING DIRECTOR THE MANAGING DIRECTORStaco Prime Capital Limited F & C Securities Limited1681, Olakunle Bakare Street, 13, Ribadu RoadVictoria Island Ikoyi - Lagos.Lagos

Dear Sir,

FOOD EMPORIUM INTERNATIONAL LIMITED - PRIVATE PLACEMENT OF300,000,000 ORDINARY SHARES OF 50KOBO EACH N2.50 PER SHARE(”THE OFFER”)

MEMORANDUM ON REVISED PROFIT FORECASTWe have reviewed the accounting bases and assumptions for the revised profit forecast ofFood Emporium International Limited (for which the directors are solely responsible) for theyears ending 30th April 2009, 2010 and 2011.

In our opinion, the profit forecast so far as the accounting bases and calculations are con-cerned have been properly complied on the footing of the assumptions made by the direc-tors and are presented on the bases consistent with the significant accounting policies nor-mally adopted by the company.

However, there will usually be differences between forecasts and actual results, because eventsand circumstances frequently do not occur as expected and these differences may be mate-rial.

We have no responsibility to update this report for events and circumstances occurring afterthe date of this report.

Yours faithfully,


a) The forecast has been prepared on a ba-sis consistent with the accounting poli-cies of the Company.

b) There will be no material change in theaccounting policies currently in use bythe Company.

c) The quality of the Company’s manage-ment will be sustained during the fore-cast period.

d) There will be no drastic change in thelegal, political and economic environ-ment that will adversely affect the opera-tions of the Company.

e) The business cycle is expected to remainstable over the forecast period based onrobust economic forecasts.

Basis and Assumptions for theFinancial Forecast

f ) Taxation comprising of Income and Edu-cation taxes will be at an average rate of32% of Net Profit before Tax.

g) It is expected that the rate of growth inincome will be higher than the rate ofgrowth of expenses for the reasons ofeconomies of scale.

g) The Company will continue to enjoy thegoodwill of present and future custom-ers.

h) There will be no litigation with adversematerial consequence to the company.

i) The Company will maintain a stable divi-dend payout of at least 40% of net in-come for the next three years.


Profit Forecast

2009 2010 2011 N ‘000 N ‘000 N ‘000

Turnover 731,000 1,312,000 2,260,000Cost of Goods Sold 358,190 590,400 1,017,000Gross Margin 372,810 721,600 1,243,000ExpensesPayroll 28,546 34,255 41,106Marketing/Promotions 24,649 29,579 35,495Rent 5,607 6,729 8,074Utilities 6,899 8,278 9,934Professional Fees 2,237 2,684 3,221Insurance 293 351 422Other Admin related cost 17,678 21,214 25,457Depreciation 16,599 19,919 23,903Pre-operational Expenses 9,862 9,862 9,862Total Operating Expenses 112,373 132,876 157,478Interest Expense 8,442 10,130 12,156Profit before Taxation 251,993 578,593 1,073,364Taxation 80,638 185,149 343,476Profit after Taxation 171,355 393,443 729,887Proposed Dividend 68,542 157,377 291,955Retained Profit 102,813 236,065 437,932

Earnings per Share 0.10 0.22 0.42

Dividend per share 0.04 0.09 0.17


Letter from the Financial Advisers

12 September 2008

The DirectorsFood Emporium International Limited66 Issac John StreetGRAIkejaLagos

Dear Sirs

Food Emporium International Limited’s Private Placement of300,000,000 Ordinary Shares of 50 Kobo each at N2.50 per Share

We write further to the Private Placement Memorandum issued in respect of the private place-ment of 300,000,000 ordinary shares of 50 kobo each at N2.50 by Food Emporium Interna-tional Limited. The Private Placement Memorandum contains forecasts of the profits of theCompany for the years ending 30 April 2009, 2010 and 2011.

We have discussed the basis and assumptions upon which the forecasts were made with youand with S.I.A.O, the Reporting Accountants. We have also considered the letter dated Sep-tember 9, 2008 from the Reporting Accountants regarding the accounting bases and calcula-tions upon which the forecasts were compiled.

Having considered the assumptions made by you as well as the accounting basis and calcula-tions reviewed by the Reporting Accountants, we consider that the forecasts (for which youas Directors are solely responsible) have been made by after due and careful enquiry.

Yours faithfullyFor: Financial Advisers

Cordros Capital Limited Stacoprime Capital Limited F&C Securities Limited


Statutory and General Information

Incorporation and Share Capital history

The table below shows in detail the shareholding structure made from incorporation up tilldate:

Date Authorised Share CapitalIncrease(N) Cumulative (N)

2002 - 10,000,000.002002 40,000,000.00 50,000,000.002004 50,000,000.00 100,000,000.002008 900,000,000.00 1,000,000,000.00

Shareholding Structure

The Company’s present issued share capital of N710,000,000 comprising 1,420,000,000 Ordi-nary Shares of 50 Kobo each is held as set out below:

Name of Shareholder No. of Ordinary Shares % of Holding

S.S. Skot & Co. Ltd 227,200,000 16Kaylords Enterprises 213,000,000 15C.T. Investment Ltd 198,800,000 14Emerald Enterprises 198,800,000 14Stern Investments Ltd 198,800,000 14Dereo Investments Ltd 142,000,000 10Merlot Investments Ltd 127,800,000 9Lumiere Investments Ltd 56,800,000 4Dr Sola Ayandele 28,400,000 2Logistics First Ventures 21,300,000 1.5Tony Anenih Jnr. 7,100,000 0.5


Directors’ Beneficial Interests

As at the date of this Private Placement Memorandum the Directors of the Company hadbeneficial interests in the share capital of the Company as follows:

Director Direct Holding Indirect Holding % of Holding

Sobowale Onasanya - S.S Skot & Co. Ltd 16Kunle Shokunbi - Kaylords 15Tunde Okoturo - Emerald Enterprises 14Ebisan Rewane - Stern Investments Ltd 14Dere Otubu - Dereo Investments Ltd 10Costa Mazzis - Merlot Investments Ltd 9Dapo Oyewumi - - -Laolu Akerele - - -Dan Awani - - -

Investments and Subsidiaries

Food Emporium International Limited has investments in the following companies as follows:

Company Units Held % Holding

Platinum Foods Limited 510,000 51Avio Foods Limited 600,000 60Consolidated Franchises Limited 1,000,000 100Consolidated Franchises Ghana Limited 200,000 30

Claims and LitigationCurrently, there are no legal proceedings filed against Food Emporium International Limited.Also at the time of preparing this Private Placement Memorandum, there were no casesbrought by FEIL against any third party.

Other DisclosuresNo petition under any bankruptcy has been filed against any of the Directors or any suchpartnership in which such persons are/were partners or any company in which such per-sons are/were Directors.

No Director of FEIL has been convicted of in a criminal proceeding or is named subject ofa pending criminal proceeding relating to an offence involving fraud or dishonesty.

No Director of FEIL has been the subject of any order, judgment or ruling of any court ofcompetent jurisdiction, tribunal or government body, permanently or temporarily en-joining him from acting as an investment advisor, dealer in securities, director or em-


ployee of a corporate body or engagingin any type of business practice or pro-fession.

The Directors of FEIL jointly and individu-ally accept full responsibility for the ac-curacy of the information given in thisdocument and confirm having made allreasonable enquires, and that to the bestof their knowledge and belief, there areno facts or circumstances, the omissionof which would make any statement con-tained herein misleading.

Extracts From Memorandum and Articles ofAssociation

Private Company

The Company is a private Company andaccordingly:

(a) The right to transfer shares is restrictedin the manner hereinafter prescribed;

(b) The number of members of the Com-pany (exclusive of persons who are in theemployment of the Company or personswho having been formerly in the em-ployment of the Company were while insuch employment and have continuedafter the determination of such employ-ment to be members of the Company) islimited to fifty; Provided that where twoor more persons hold one or more sharesin the Company jointly they shall for thepurpose of this regulation be treated assingle member;

(c) Any invitation to the public to subscribefor any shares or debentures of the Com-pany is prohibited;

(d) Any invitation to the public to depositmoney for fixed periods or payable at callwhether or not bearing interest is pro-hibited;

(e) The Company shall not have power toissue share warrants.

Classes of Shares

The Company may from time to time is-sue classes of shares. It shall be the re-sponsibility of the Directors to determinethe classes of shares to be issued. All therights or restrictions attached to eachparticular class of shares shall be speci-fied in the terms of issue but such rightsmay at any time be varied in accordancewith the provisions of the Act.

Without prejudice to any special rightspreviously conferred on the holders ofany existing shares or classes of shares,any share in the Company may be issuedwith such preferred, deferred or otherspecial rights or such restrictions,whether with regard to dividend, returnof capital or otherwise as the Companymay from time to time by ordinary reso-lution determine.


Transfer and Transmission of Shares

Subject to the provisions hereinafter con-tained, shares in the Company shall betransferable by written instrument in thecommon form or in any other form whichthe Directors may approve and shall besigned by both the transferee and thetransferor and the transferor shall bedeemed to remain the holder of theshares until the name of the transferee isentered in the register of members in re-spect thereof.

The personal representatives of a de-ceased holder of a share shall be the onlypersons recognised by the Company ashaving any title to the share. In the caseof a share registered in the names of twoor more holders, the survivors or survi-vor, or the personal representatives of thedeceased survivors, shall be the only per-sons recognised by the Company as hav-ing any title to the share.

Any person becoming entitled to a sharein consequence of the death or bank-ruptcy of a member shall upon such evi-dence being produced as may from timeto time be required by the Directors havethe right either to be registered as amember in respect of the share or insteadof being registered himself, to make suchtransfer of the share as the deceased orbankrupt persons could have made; butthe Directors shall, in either case, havethe same right to decline or suspend reg-istration as they would have had in thecase of a transfer of the share by the de-ceased or bankrupt person before thedeath or bankruptcy.

Any person becoming entitled to a sharein consequence of the death or bank-ruptcy of a member shall be entitled to

the same dividends and other advan-tages to which he would be entitled if hewere the registered holder of the share,except that he shall not, before beingregistered as a member in respect of theshare, be entitled in respect of it to exer-cise any rights conferred by membershipin relation of meetings of the Company.

Commission and Brokerage

The Company may exercise the powersof paying commissions conferred by Sec-tion 131 of the Act, provided that the rateper cent or the amount of the commis-sion paid shall be disclosed in the man-ner required by the said section. Suchcommission may be satisfied by the pay-ment of cash or the allotment of fully orpartly paid shares or in one way andpartly in the other.

The Company may also on any issue ofshares pay such brokerage as may belawful

Alteration of Capital

The Company may from time to time byordinary resolution increase the sharecapital of the Company by such sum tobe divided into shares of such amountand on such terms as the resolution shallprescribe.

Subject to the provisions of the Act, theCompany may whenever it considers itexpedient so to do, by special resolutionreduce its share capital, any capital re-demption fund or any share premiumaccount.


Declarations and Consents

The following have given and not withdrawn their written consent to the issue of this privateplacement memorandum and to have their names mentioned in the form and context inwhich they appear therein:

Directors Sobowale OnasanyaEdward AkereleDaniel AwaniEbisan RewaneTunde OkoturoDere OtubuKunle ShokunbiDapo OyewumiKonstantinos Mazzis

Company Secretary Rook & Co

Solicitors to the Company Rook & Co

Joint Auditors AO & A Audit (Chartered Accountants)Ijewere & Co. (Chartered Accountants)

Lead Financial Advisers Cordros Capital LimitedStacoprime Capital Limited

Joint Financial Adviser F&C Securities Limited

Solicitors to the Placement Mbanugo Udenze & Co

Reporting Accountants S.I.A.O

Registrars United Securities Limited

Receiving Banks Zenith Bank PlcAccess Bank Plc


Documents Available for Inspection

The following documents are available forinspection at the head office of Food Empo-rium Limited situated at 66 Issac John Street,GRA, Ikeja, Lagos during normal businesshours on any weekday during the applicationperiod.

a) The Certificate of Incorporation of theCompany.

b) The Memorandum and Articles of Asso-ciation of the Company.

c) The Company’s Audited financial reportsfor the past three years.

d) The Reporting Accountants Report onthe historical financial statements.

e) The Private Placement Memorandum.

f ) Written consents of the parties referredto above.

g) The Company’s Board resolution approv-ing the Private Placement.

h) The Shareholders’ resolution approvingthe Private Placement and waiving thepre-emptive rights of the shareholders.

i) Approvals for increase in authorizedshare capital


Procedure for Application andAllotment

Application

a) An application must be made on the of-ficial Application Form.

b) Applications must be made for a mini-mum of 1,000,000 shares and in multi-ples of 500,000 shares thereafter. Thenumber of shares which application ismade for and the full payment due inrespect thereof by cheque or bank draftshould be entered in the boxes provided.

c) Every applicant or joint applicant (as maybe applicable) must write his/her fullnames, addresses and occupation n theApplication Form. An application by acorporation must bear its seal and com-pleted under the hand(s) of a duly au-thorized official(s) who should state hisor her designation.

d) Each applicant should forward his/herApplication Form with the cash, cheque,certified cheque, bank draft or evidenceof money transfer for the full amount ofthe purchase price to Cordros CapitalLimited, 16 Amodu Ojikutu Street, Victo-ria island, Lagos or Stacoprime CapitalLimited, Plot 1681 Olakunle BakareStreet, Victoria Island, Lagos or F&C Se-curities Limited, 13 Alhaji Ribadu Street,Ikoyi, Lagos. All cheques must be crossedand marked “Barcelos Offer” and madepayable to any of the Financial Advisers.All cheques and drafts will be presentedupon receipt and all applications in re-spect of which cheques are returnedunpaid will be rejected.

Allotment

The Directors of Food Emporium Interna-tional Limited reserve the right to accept orreject any application in whole or in part. Allirregular applications will be rejected.

Application Monies

The Financial Advisers will retain all applica-tion monies in a separate bank account pend-ing the allotment of the shares. If any appli-cation is not accepted, or is accepted for fewershares than the number applied for, the fullamount or the balance of the amount paid(as the case may be) will be returned withinone week of the allotment.

FOOD EMPORIUM INTERNATIONAL LIMITED

Private Placement Of

300,000,000Ordinary Shares of 50k each

@N2.50 per Share

Payable in full on application

Lead Financial Advisers

Joint Financial Adviser

Applications must be made in accordance with the instructions set out on the back of this Application Form. Care must betaken to follow these instructions as applications that do not comply may be rejected. If you are in doubt as to the action totake please consult your Stockbroker, Accountant, Banker, Solicitor or any other professional adviser for guidance immedi-ately.

Date: …………/…………/2008

Number of shares applied for Value of shares applied for

Value of cheque/bank draft attached:

Cheque details - cheque number:

Name of bank/branch:

Account Number:

Guide To Application

Number of shares applied for Amount payable1,000,000 minimum N2,500,000.00Subsequent multiples of 500,000 N1,250,000.00

DECLARATION

I/We am/are 18 years of age or over

I/We attach the amount payable in full on application for the number of shares indicated in Food Emporium International Limited at N=2.50 pershare.

I/We agree to accept the same or any smaller number of shares in respect of which allotment may be made upon the terms of the PlacementMemorandum dated Friday, 19 September, 2008 and subject to the Memorandum and Articles of Association of Food Emporium InternationalLimited.

I/We authorise you to send a share certificate and/or a cheque for any amount overpaid, by registered post at my risk to the address first givenbelow and to procure registration in my/our name as the holder(s) of such number of shares or such smaller number, as aforesaid.

I/We declare that I/we have read a copy of the Private Placement Memorandum for the Offer dated Friday, 19 September, 2008 issued by theFinancial Advisers on behalf of Food Emporium International Limited.


Instructions for Completing the Application Form

1. Applications should be made only on the accompanying Application Form (Photostat or scanned copiesof the Application will not be accepted).

2. Applications must be for the minimum of 1,000,000 shares and in multiples of 500,000 thereafter.

3. The Application Form when completed should be submitted to Cordros Capital Limited, StacoprimeCapital Limited and F&C Securities Limited. Applications must be accompanied by a cheque or bankdraft made payable to the designated branches of Zenith Bank Plc or Access Bank Plc. The chequemust be drawn on a bank in the same town or city in which the branch of Zenith Bank Plc or AccessBank Plc is located and crossed “Barcelos Offer” with the name, address and daytime telephone numberof the applicant written on the back of the cheque.

4. The applicant should make only one application, whether in his/her own name or in the name of anominee. Multiple or suspected multiple applications will be rejected.

5. Applicants must be at least 18 years or older.

6. Joint applicants must all sign the Application Form.

7. An application from a corporate body must bear the corporate body’s seal and be completed underthe hand of a duly authorized official.

8. An application from a Pension or Provident Fund must be in the name of each individual trustee un-less the trustee is a limited liability company.

CORPORATE INFORMATION 7 SUMMARY OF THE …€¦ · Food Emporium International Limited 3 Contents...

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