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; request a free guide on NISAs from Hargreaves Lansdown
How couples can protect their financial interests when cohabiting
Authorities failing in hunt for 'most wanted' tax dodgers who owe HMRC £844m
A student's guide to financial survival: You don't have to drown in debt at university
Bargain Hunter: Kit yourself out in sports gear - at a healthy discount of up to 75%
The HiFX guide to managing corporate foreign exchange and international payments
- 1 Arizona shooting: Gun instructor accidentally killed by nine-year-old girl with Uzi
- 2 Miley Cyrus' homeless MTV VMAs date, Jesse Helt, is wanted by the police
- 3 Paul Scholes: Manchester City were so good against Liverpool I felt like turning the television off
- 4 Notting Hill Carnival: Woman shares selfie after being ‘punched in face for telling man to stop groping her’
- 5 Pamela Anderson rejects ice bucket challenge because of ALS experiments on animals: 'Mice had holes drilled into their skulls'
Exclusive: We share blame for creating 'jihad generation', says Muslim strategist
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
Arizona shooting: Gun instructor accidentally killed by nine-year-old girl with Uzi
- < Previous
- Next >
iJobs Money & Business
£25000 - £35000 Per Annum: The Green Recruitment Company: Job Title: Junior As...
£33000 - £40000 Per Annum Discretionary profit share: The Green Recruitment Co...
£20000 - £30000 per annum + OTE £45000: SThree: SThree are a global FTSE 250 b...
£350 - £400 per day: Orgtel: PMO Analyst - Risk - Banking - London - £350 - £4...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony