Written by Adrie van der Luijt 24 September 2007
Coffee Republic, the coffee shop turned deli franchise that saw its founder ousted last year and replaced by two of its shareholders, has appointed a new Finance Director.
The Board of Coffee Republic has announced the appointment of James Muirhead as Finance Director with effect from 21 September 2007. It is expected that he will be admitted to the board by Christmas 2007.
Coffee Republic plc (LSE:CFE) runs speciality espresso and deli bars, both directly and through franchises. It reported a turnover of £9.72 million for the year ended 26 March 2007, down from £30.3 million in 2003 primarily due to its newly introduced franchise model, with pre-tax losses of £2.45 million compared to £9.82 million in 2003. Accumulated losses stood at over £7 million for the year to 26 March 2007. In 2006 Coffee Republic had a £14.9 million turnover with a pre-tax loss of £1.45 million.
Single digitsLaunched by Bobby and Sahar Hashemi in 1995 as essentially a UK version of Starbucks, Coffee Republic saw its share price soar to 35 pence in the late nineties. However, after the charismatic brother and sister team cashed in on their shares and left the company, the Group has seen its share price go into single digits as it failed to make a profit.
In 2002, Bobby Hashemi returned to launch an attempt to transform and rescue Coffee Republic. In 2005, he launched the idea of franchising the stores, after the model successfully applied by McDonalds, Domino Pizza and others in the food sector. The newly franchised stores were also re-branded and transformed from coffee shops to delis. This resulted in a 30 per cent increase in sales, but still failed to get the company into profit. Further placings raised £850,000 to tie Coffee Republic over.
Disgruntled shareholdersBobby and Sahar Hashemi published their book Anyone Can Do It, the best-selling story of how they had built the Coffee Republic brand from their kitchen table and the "57 laws of entrepreneurship" they had deducted in the process.
However, disgruntled shareholders, led by Steve Bartlett and Peter Breach, managed to collect the votes of over 50 per cent of shareholders and forced Hashemi out in October 2006. Steve Bartlett and Peter Breach subsequently became CEO and Chairman of the company respectively.
This year, shares fell from 3.94 pence on 1 June 2007 to 2.44 pence on 17 August. Sales dropped by over a third (34.8 per cent) after it converted to franchising earlier this year. This, however, is likely to be misleading as it does not take into account sales in the franchised shops.
ConfidentOperating losses widened to £1.63 million from £1.05 million last year, as a result of costs incurred from a change in management, increases in occupancy costs and investment in resources to support its growing franchise network.
However, the company said it remained confident for future growth once the effects of its new strategy had been given more time. Last month Coffee Republic received The Media Today Business Achievement Awards for Best Investment 2007. Yesterday shares in Coffee Republic closed at 2.80 pence.
James Cameron Muirhead, 36, qualified as a Chartered Accountant with PricewaterhouseCoopers in 1998 and has worked with a number of high growth multi-site, leisure businesses including Novus Leisure ltd, the operator of the Tiger Tiger nightclub brand, and health club operator Esporta Plc.
Esporta, bought in November last year from private equity firm Duke Street Capital by the Syrian billionaire Simon Halabi for about £480 million, went into administration last month after failing to syndicate an estimated £330 million of debt funding in the midst of turmoil in the credit markets. Halabi is also the investor behind London's stalled Shard of Glass building at London Bridge.
Commenting on the appointment of James Muirhead, Steven Bartlett, Chief Executive, said: “I am delighted that James has decided to join Coffee Republic and look forward to the experience he can bring us from his time working in high growth, multi-site, branded business. He is joining at an exciting and challenging time in the Company’s history and I wish him luck in this time with us”
Difficult timesMuirhead replaces Simon Drysdale, who stepped down at the end of July 2007. The company's Financial Controller, Roy Balint-Kurti, was promoted to Head of Finance and acting Director of Finance in the interim period.
Commenting on Drysdale's departure, Steven Bartlett, Chief Executive, said in May: "I am disappointed that Simon has decided to leave but would like to acknowledge his invaluable contribution to Coffee Republic over the last four years during which he has steered the Company through some difficult times. I would like to thank him for the way in which he handled the management transition in October of last year and the support given to Peter Breach and myself once we joined Coffee Republic."
Simon Drysdale said: "My four years with Coffee Republic have been stimulating and challenging in equal measure and, having been closely involved in the development of the franchise strategy, it is satisfying to leave the Company with a clear view of the future. Whilst it is an exciting time of growth for Coffee Republic I have been offered the opportunity to become involved in a new and innovative restaurant concept which provides me with a fresh challenge."
Peter Breach, Chairman, said: "It is disappointing to lose someone with Simon's experience but we are lucky to have such a strong head office team and Coffee Republic's expansion will continue apace. Indeed, the strength of the Coffee Republic brand and the demand from franchisees from both within the UK and internationally will require us to take on additional resource at head office particularly in the areas of property and franchisee support."
18 December 2007
