No Pain No Gain: Wake up and smell the potential at Coffee Republic
Saturday 12 January 2008
The coffee may be splendid but the aroma that has surrounded Coffee Republic for much of its time as a quoted company has not been particularly pleasant for investors.
But it appears that a shareholders' revolt could be heralding a change in the group's fortunes. Although these are early days – and there is many a slip 'twixt cup and lip – the signs are that new management is getting to grips with the chain's problems and that the coffee and deli retailer is now moving in the right direction.
CR has been a bitter disappointment to many since it arrived on the stock market a decade or so ago. Since then, losses have been a continuing feature, cash injections have been undertaken, and takeover approaches have been spurned.
The first outlet was established in 1994 when brother and sister Bobby and Sahar Hashemi decided that London lacked sophisticated coffee houses. They were among the pioneers of US-style coffee bars in this country but, like many a trailblazer, they found the going tough. Their business grew quickly, but competition from Starbucks and others took its toll.
Bobby Hashemi, a former investment banker, decided to step down as executive chairman in October 2006, with opposition to his reign increasing. Two shareholders, then accounting for around a quarter of CR's capital, conducted an acrimonious and stirring campaign. It seems likely that Hashemi jumped before he was pushed.
Discontented shareholder Peter Breach took over as chairman, with fellow conspirator Steven Bartlett, who gathered support through an internet chatroom, becoming chief executive. They must have realised that they faced an uphill struggle.
The company is a stranger to the dividend list, and in the past four years alone has suffered losses of more than £7m. In the last half year, the first accounting period with the rebels in charge, there was something of an improvement, with the loss cut from £1.3m to £895,000. CR remained in a negative asset position at the interim stage. Not a satisfactory state of affairs.
But there are mitigating influences. The gap could easily be eliminated, and the company says its bankers are supportive. Even so, another cash call could be on the menu following placings that produced around £1.6m last year.
Before his departure, Hashemi was switching the chain's emphasis from company-owned outlets to franchises. This process has continued. Of the 80-plus domestic outlets, more than 40 are now franchised. An intriguing link has been established with Cineworld to develop a presence in each of its 73 cinemas. And a deal has been forged with Greene King, the brewer and pub owner.
And CR is also developing overseas. It is now represented in eight countries and is keen to spread its presence. The franchise model, through the granting of a master franchise for a country, seems ideal for international expansion.
Breach believes that in spite of CR's modest size – it is capitalised at about £13m – overseas growth could be considerable, particularly in Asia. Economic expansion in the East, he says, "does not suffer from the high level of regulation which applies to the West".
At one time, the franchise industry had a decidedly downmarket image. But times change, and today a host of leading names has adopted the franchise approach. The number of franchisees, often recruited from middle management, is growing rapidly. Myhome International, the residential cleaning to car valeting group, is thought to have the largest army of franchisees – more than 800 – in this country.
As I've said, I am seeking recruits for the No Pain, No Gain portfolio, and CR could be an interesting addition. The shares, at about 2.1p, are in the penny-dreadful category and obviously highly speculative. They are certainly outside the widows and orphans orbit.
The portfolio is not afraid to take the odd gamble, and over time CR could prove to be a rewarding investment. But I am in no rush to take the plunge. Coffee Republic, with its drink and food offerings, could be a casualty of the belt-tightening that seems an inevitable consequence of the credit crunch that has so alarmingly been created by madcap bankers.
Eating-out shares have already taken a battering. But coffees bars and suchlike are low-ticket retailers and should avoid any serious injury from consumers cutting back their spending. After all, a cup of coffee and a sandwich hardly rate as luxuries.
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
- 1 Rules on 5p plastic bags likely to lead to arguments at the check-out
- 2 Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
- 3 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
- 4 News agency criticised for describing Amal Clooney as 'actor's wife' in coverage of human rights trial
- 5 David De Gea to Real Madrid: Real finally get their man with £29m bid for Manchester United goalkeeper
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...
Day In a Page
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.