Back in the boom years - October 2006 to be precise - a couple of property developers took control of Coffee Republic after ousting chairman and founder Bobby Hashemi.
They had big plans for this underperforming company.
Sadly things did not work out.
Monday’s release from the London Stock Exchange:
NOTICE (488)
06/07/2009 7:00am
TEMPORARY SUSPENSION OF TRADING ON AIM COFFEE REPUBLIC PLC
At the request of the company trading on AIM for the under-mentioned securities has been temporarily suspended from 06/07/2009 7:00am pending clarification of the company’s financial position.
Coffee Republic, which has nearly 200 bars round the UK, had in fact asked for its shares to be suspended on Thursday ahead of the appointment of administrators to a number of subsidiaries, including its UK offshoot:
“The board of Coffee Republic has requested the suspension of the quotation of its shares pending clarification of the financial position of certain subsidiaries including Coffee Republic (UK) Limited, the principal UK operating company.
Given the recession and the fact that the UK coffee market is seriously over-broked, this is probably not the most startling of news. But what is perhaps surprising is that the company gave no hint of problems when it last filed results in December. In fact chairman Peter Breach was positively bullish:
When Stephen Bartlett and I joined the Board two years ago we said that we wanted Coffee Republic to be free of bank borrowings. At that time, bank borrowings amounted to ?3.3m. We progressively reduced those borrowings to ?1.5m at the end of this half year (28 September). As of yesterday (Tuesday 2 December) I’m pleased to be able to say the company became free of bank debt.
The repayment results in the elimination of interest and charges approaching ?200,000 a year and that effect, combined with a steadily improving trading position across the broad portfolio, gives me confidence that the Company is likely to be operationally cash flow positive, and may indeed be earnings positive, by the end of the current financial year – I believe for the first time in the Company’s history.
And the recent share price action also did not suggest anything was wrong.
The stock started the year at 23p and was suspended at 22p — although it was trading at 160p when Hashemi was removed.
So what went wrong? December’s statement provides a clue: the weakness of the franchise business model:
The possibility of more stores being returned must remain an area of concern for all franchise businesses in the current economic environment but the raising of standards required of franchise proposals should reduce this problem in future.