25 September 2007Our View: Buy
Current price: 2.8p (+ 0.1p)
Investors could be forgiven for running a mile at the mere mention of the name Coffee Republic. The company has, after all, spent 12 years charging two quid for a cappuccino and yet failed to make money out of it.
Those with an appetite for a punt might care to take a fresh look at the company. Yesterday, it announced a franchising deal with Paris Group, a major retailer operator in the Gulf, which will see the company’s shops springing up in many of the more exciting parts of that booming region such as the United Arab Emirates, Bahrain, Qatar and Oman.
Franchising is new chief executive Steven Bartlett’s prescription for what has been ailing this company, which has long struggled against the other chains in the UK. And the deal with Paris looks a good one. It gives the company an upfront fee, royalty payments, and, crucially, full brand approval.
Bartlett says more are in the pipeline both in the UK and abroad and believes the company should go cash positive before too long. He will understand that investors – who have listened to sweet words from Coffee Republic and been burned before – might feel once bitten, twice shy.
To be fair, he put his money where his mouth is when the company tapped the market for £1m in March, and he might have found a formula to turn this long-time ugly duckling into a swan. Based on that, it is worth tucking a few of these shares away to see if he has. Buy.
