Coffee Republic expanding rapidly14 January 2008
Written by: Nigel Bolitho
Coffee Republic's share price has yet to be react to new management efforts to expand operations and move into profits. But investors should note that, for the moment at least, neither the chairman, Peter Breach, nor the chief executive, Steven Bartlett, are receiving any payments and are covering their own expenses.
The game plan is rapid expansion. Between March 2007 and the beginning of December, the number of outlets in the UK jumped from 43 to 82. The figure for franchised bars is up from 25 to 42, and the number of concessions has also risen sharply. Over the same period the number of UK regional franchises has risen from six to 19, and International Master Franchises was up from two to eight.
Other signings are said to be imminent.
These franchises produce up-front payments, but in accounting terms have to be spread over the full term of the franchise, which could conceivably run to 15 years: so short term cash flow and the balance sheet will be a better guide to Coffee Republic’s health than the profit & loss account. The company opened 10 further outlets in December, and may start operating bars in shopping centres. Brokers expect a full year loss of £1.5m then close to break-even in 2008/9.
COFFEE REPUBLIC (CFE)
ORD PRICE: 2.1p
MARKET VALUE: £ 13.1m
TOUCH: 2.05-2.15p
12-MONTH HIGH: 3.95p
12-MONTH LOW: 2.1p
DIVIDEND YIELD: NIL
PE RATIO: NA
NET ASSET VALUE: 0.3p
NET DEBT: 99%
IC VIEW: Buy
Coffee Republic seems to have the right formula to be successful. Speculative buy.
Last IC view: High enough, 2.8p, 29 Sept 2006
