RNS Number:2179Z
Coffee Republic PLC
29 July 2002
29 July 2002
COFFEE REPUBLIC PLC
Coffee Republic plc, the coffee bar operator with 108 bars, announces
preliminary results for the year ended 31 March 2002.
Summary
• Turnover growth of 32% to £27.8 million (2001 : £21.0 million)
• Operating losses before exceptional items reduced by 25% to £1.9
million (2001 : loss of £2.5 million)
• First positive EBITDA before exceptionals achieved of £1.0 million
(2001 : loss of £0.35 million)
• Operating review underway with focus on increasing sales, reducing
operating costs and improving cash generation from existing portfolio
• 18 under performing bars, accounting for 10% of sales, identified for
disposal and exceptional charge taken
• Strategic review underway to fully exploit value of remaining high
quality estate, strong management team and brand recognition.
Commenting on the results, Bobby Hashemi, Executive Chairman said:
"These results are disappointing in what was a difficult year for our sector.
The first steps have been taken to improve operating performance and cash
returns, and the board believes the Company's underlying strengths provide clear
and tangible opportunities for restoring shareholder value."
For further information, please contact:
Coffee Republic
Bobby Hashemi 020 7940 1750
Buchanan Communications
Tim Thompson / Nicola Cronk 020 7466 5000
Chairman's Statement
The past year has been a challenging year for Coffee Republic against the
background of rapid market expansion and increased competition. As indicated in
the trading statement in February, following a disappointing performance in
January, results for the year ended 31 March 2002 have not met expectations.
For the year ended 31 March 2002, sales grew by 32% to £27.8 million (2001:£21.0
million). Operating losses before exceptional items reduced by 25% to £1.9
million (2001: Loss £2.5 million). The loss before tax was £7.5 million (2001:
Loss £2.4million) including exceptional charges of £5.7 million (2001: £0.2
million).
From a cashflow perspective the business generated a profit before interest,
depreciation and exceptional charges (EBITDA) of £1.0 million (2001: loss of
£0.35 million).
Review
The Board asked me to return to the executive management team on 25 April 2002
and lead a thorough review of business strategy in the light of trading
performance. We are currently engaged in a review of both our operations and
our business strategy. We are putting in place a programme aimed at improving
short term profitability and cash generation and actively developing a strategy
aimed at restoring shareholder value in the competitive market place.
During the year we opened 34 new bars, bringing our total at the year end to
107. Eighteen of the new bars were acquired with the purchase of Goodbean Ltd,
an independent operation. Revenue growth was driven by new bar openings. As
reported at the interim stage, like for like sales were down by 5.8% and it is
disappointing to report a full year like for like decline of 6.8% (2001: Growth
of 8.4%).
The exceptional items of £5.7 million relate primarily to a charge of £5.3
million in respect of bar closures, and £0.4 million in respect of restructuring
and redundancy costs. The bar closures charge comprises the actual loss on
disposal for 3 bars that were closed during the year and the expected loss on
disposal of a further 18 bars (accounting for 10% of our sales) which are in the
process of being sold, including a provision for expected costs that we are
committed to under lease contracts. Our remaining estate will consist of 90
trading bars net of these disposals.
In June 2002, revised banking arrangements were put in place until December.
With net debt of £2.5 million, our balance sheet gearing ratio was 20%. Our
bankers remain supportive and it is anticipated that a longer-term arrangement
will be put in place, which recognises the underlying cash generative qualities
of the business, and its potential following completion of our strategic review.
Board
A number of changes were made to the Board since the beginning of the new year.
I was elected executive chairman, having previously served in a non-executive
capacity. At the same time, Nicholas Jeffrey stepped down as non-executive
chairman, but continues on the board as a non-executive director. Stephen
Thomas also stepped down as a non-executive director. I would like to thank
both Nicholas and Stephen for their contribution to the growth of Coffee
Republic over the past four years, and look forward to continuing to work with
Nicholas on the board.
William Scott resigned as finance director in April 2002 and has since been
replaced by Richard Bingham as interim finance director. Richard brings a
wealth of finance experience to our Company, having previously been interim
finance director at Telspec Plc, and a director at Deloitte & Touche.
We also expect to recruit additional non-executive directors to broaden the
independent view on the board.
Prospects
Given the change in market conditions, we are taking prompt and decisive action.
In the short term, we have put our expansion programme on hold in order to
focus on improving returns from our existing bar portfolio. We are also
disposing of 18 of our under-performing bars comprising 10% of our sales, and
reducing our cost base. At the bar level, we are implementing a number of
initiatives to increase our revenues, improve margins and lower bar operating
costs.
Our strategic review of the business is actively in progress, and we are
currently evaluating a range of new opportunities to provide us with a clear
path to profitability. The new opportunities being explored are aimed at
enabling the Company to fully exploit the value of the remaining high quality
estate, strong management team and brand recognition.
I look forward to updating shareholders regarding the outcome of our strategic
review in the near future.
Bobby Hashemi
Executive Chairman
29 July 2002
Consolidated Profit and Loss Account
for the year ended 31 March 2002
Note 2002 2001
Acquisition Total
£000 £000 £000 £000
Turnover 26,736 1,081 27,817 21,005
Cost of sales (27,746) (1,127) (28,873) (22,895)
Gross loss (1,010) (46) (1,056) (1,890)
Administrative expenses (1,106) (174) (1,280) (641)
Operating loss before exceptional items (1,814) (80) (1,894) (2,531)
Exceptional items (302) (140) (442) -
Operating loss (2,116) (220) (2,336) (2,531)
Exceptional items (4,119) (1,135) (5,254) (230)
- loss on disposal of fixed assets
Loss on ordinary activities (6,235) (1,355) (7,590) (2,761)
Interest receivable 184 388
Interest payable and similar charges (81) (30)
Loss on ordinary activities (7,487) (2,403)
before and after taxation
Loss per ordinary share:
Basic and Diluted 2 (3.43p) (1.23p)
Loss per share before exceptional items:
Basic and Diluted (0.82p) (1.11p)
All recognised gains and losses are included in the profit and loss account.
All amounts relate to continuing operations.
Consolidated Balance Sheet
at 31 March 2002
2002 2001
£000 £000 £000 £000
Fixed assets
Intangible assets 229 -
Tangible assets 18,083 15,922
Current assets
Stocks 302 181
Debtors 2,237 291
Cash at bank and in hand 692 7,162
3,231 7,634
Creditors: amounts falling due within one year (5,460) (4,496)
Net current (liabilities)/assets (2,229) 3,138
Total assets less current liabilities 16,083 19,060
Creditors: amounts falling due after more than one (2,568) (118)
year
Provision for liabilities and charges (1,078) -
Net assets 12,437 18,942
Capital and reserves
Called up share capital 11,228 10,739
Share premium account 17,799 17,306
Profit and loss account (16,590) (9,103)
Shareholders' funds - equity 12,437 18,942
Consolidated Cashflow Statement
for the year ended 31 March 2002
2002 2001
£000 £000
Net cash (outflow) / inflow from operating activities (2,045) 1,985
Returns on investments and servicing of finance 147 358
Capital expenditure (7,238) (7,475)
Acquisition (225) -
Cash outflow before liquid resources and financing (9,361) (5,132)
Management of liquid resources 6,837 (4,524)
Financing 2,891 9,879
Increase in cash in the period 367 223
2002 2001
£000 £000
Reconciliation of net cashflow to movement in net funds
Increase in cash in the period 367 223
Cash (inflow)/outflow from increase in debt and lease financing (2,747) 247
Cash (inflow)/outflow from (decrease)/increase in liquid (6,837) 4,524
resources
Change in net debt arising from cash flow (9,217) 4,994
Finance lease acquired with subsidiary (113) -
Movement in net funds in the year (9,330) 4,994
Opening net funds 6,827 1,833
Closing net (debt)/funds (2,503) 6,827
Notes
1. Basis of preparation
The results and balance sheet incorporate the audited results of Coffee Republic
PLC and all its subsidiary undertakings made up to 31 March 2002 and have been
prepared on a basis consistent with the audited financial statements for the
year ended 31 March 2001.
In June 2002, short term banking arrangements were put in place until December
2002 following a breach of the original banking covenants which were waived by
the Group's bankers. The Directors anticipate that a longer term arrangement
will be in place prior to December 2002 following the strategic review,
discussed in the Chairman's Statement, and hence the Directors consider it
appropriate for the accounts to be prepared on a going concern basis.
The results for the year ended 31 March 2002 have been extracted from the
audited financial statements, which will shortly be sent to shareholders and
filed with the Registrar of Companies. The auditors' report on the accounts was
unqualified, but included the following statement:
"Going Concern
In forming our opinion, we have considered the adequacy of the disclosures made
in note 1 of the financial statements concerning the uncertainty as to the
continuation and renewal of the company's bank loan facility. In view of the
significance of this uncertainty we consider that it should be drawn to your
attention but our opinion is not qualified in this respect."
2. Loss per share
The basic loss per ordinary share is based on losses after taxation of
£7,487,000 (2001 - loss £2,403,000) and a weighted average number of shares in
issue of 218,339,870 (2001 - 196,067,609). There was no difference between basic
and diluted earnings per share in 2002 and 2001.
3. The preliminary results do not constitute full accounts within the
meaning of section 240 of the Companies Act 1985. The financial information for
the year ended 31 March 2001 is extracted from the Group's financial statements
to that date which received an unqualified auditors' report and which have been
be filed with the Registrar of Companies.
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