Store expansion holds back profits at Cullens

INVESTING for future expansion is holding back profits at Cullens, the convenience store chain, despite rising sales.

Peter Matthews, Cullens' chief executive, attributed the rise in sales to the group's efforts to strengthen the image of the shops.

'More and more, we are an alternative to supermarkets for real food shopping,' he said. 'The range is better and the spend per head is increasing.'

The group's reported sales rose 17.3 per cent to pounds 1.99m, although that only includes fees for the franchised stores, which account for 23 of the 27 neighbourhood shops. Including their turnover, sales were pounds 12.6m, a rise of 6.4 per cent excluding new space.

But administrative expenses rose 30 per cent to pounds 590,000 and a further pounds 39,000 was spent on training and development.

The increase reflected the group's decision to open new stores itself because of the difficulty of attracting suitable franchisees.

Mr Matthews said the group had been investing in computer technology, which allowed the head office to monitor sales in the shops, as well as recruiting staff to handle the expansion plans.

The higher administration costs pushed the group into a pounds 46,000 operating loss for the six months to 29 August, three times the previous year's loss.

But a pounds 78,000 profit ( pounds 6,000 loss) on the sale of properties meant that pre-tax profits were pounds 18,000, compared with a pounds 16,000 loss.

The group's two other outlets had mixed fortunes. The Patisserie shop is doing well and a second outlet in west London has been opened. But the Reds Chicken & Ribs fast food store is still making a loss.

Earnings per share were 0.1p (0.1p loss) and there is again no dividend. The shares were unchanged at 13.5p.