RNS Number:8510D
Coffeeheaven International PLC
14 September 2007
coffeeheaven international plc
Final Results for the Year Ended 31 March 2007
Highlights
- Net sales increase 58% to #10.1M against prior year same period.
(Increase 60% at constant exchange rates).
- Like-for-like sales growth 27% for 12 months to 31 March 2007 (2006: 12%).
- Number of stores trading at 31 March 2007: 65 (2006: 43).
Currently 71 stores with more under contract or with terms agreed.
- Combined trading subsidiary EBITDA grew 101% to #1.5M for 12 months
to 31 March 2007. (2006: #0.7M at constant exchange rates).
- Normalised profit before taxation #208k (2006: loss #370k at constant
exchange rates).
- Stores now opened in two new markets: Bulgaria and Slovakia.
- Successful Placing in May 2007 raised #3.9M (before expenses).
- Cash and equivalents at 31 July 2007 approximately #4.7M.
Current Trading
- Current financial year to 31 March 2008 has started well.
- Headline Group sales up 59% to #5.0M for the 5 months to 31 August 2007.
- Cumulative Group like-for-like sales up 19% year to date (to 31 August
2007).
- First stores expected to open shortly in Romania and Hungary
- Macro economic conditions in Central Europe support a robust store
development programme.
Enquiries:
Richard Worthington, coffeeheaven international plc
Tel: +44 7973 442 331
Web: www.coffeeheaven.eu
Simon Turton, Opera Public Relations
Tel: 0845 0600 650 or 07976 826 004
David Poutney / Richard Thomas, Numis Securities Limited
Tel: 020 7260 1000
Executive Chairman's Statement
Meeting Objectives
In the year to 31 March 2007 all Group KPI's were met or exceeded as illustrated
below:
* Brand:
The coffeeheaven brand is now sector leader by number of stores in two major
central European markets - Poland and Czech Republic.
coffeeheaven is also believed by your Board to be overall sector leader across
central Europe by number of Company owned stores.
* Sales growth:
Sales revenue growth in the year to 31 March 2007 was 60%. (at constant prices).
* Like-for-like sales:
Group like-for-like sales growth was 27%.
* Store profitability:
Combined store profitability across the Group was 18%.
* Cash:
Group operating cash flows grew 305% against sales growth of 60%.
* New Markets:
Two new markets were opened in central Europe.
* Store development
22 new stores were opened.
Our markets
The macro economic picture in the Group's chosen markets of central Europe
remains very favourable.
Consumer spending is strong and the pace of new retail development continues
unabated.
All the Group's markets are now members of the European Union. This is creating
convergence at an unprecedented pace which is impacting business and consumers
alike.
The commercial challenges in central Europe today are very different to those of
just a few years ago. For example, until very recently human resources received
little attention - today it is a key issue for most businesses in central
Europe.
Although growing, competition in coffeeheaven's markets remains relatively
benign. Some international brands have announced plans to enter CE markets (with
franchise operations) and some have opened their first stores.
In your Board's view none of the present or prospective new entrants currently
threatens coffeeheaven's leadership positioning in central Europe.
Business Review
coffeeheaven(R) brand
The coffeeheaven brand is now well known to many of central Europe's consumers
and continues to extend recognition.
With stores in many countries across the region, coffeeheaven is fast becoming a
part of consumers' daily lives.
Your Board believes that coffeeheaven is the market leader in the branded coffee
bar market in Poland (with a 20% plus market share) and also holds a similar
positioning in the Czech Republic.
During 2006 coffeeheaven was awarded 'CoolBrand' status, putting us alongside
many of the world's leading consumer brands. A great cup of coffee is not just
about the quality of the bean - as important is the skill of the barista
preparing it.
In the 2007 Polish round of the World Barista Championships organised by SCAE
(Speciality Coffee Association of Europe), our barista's literally 'swept the
board' by taking all top three places in the Polish national finals against a
field of more than 60 barista from across the country.
Then, in July 2007, the winner of the Polish round, coffeeheaven barista Lukasz
Jura, went on to represent his country at the World Barista Championship finals
held in Tokyo, Japan. Against a large field of national winners from across the
globe, Lukasz made it into the Top Ten - so far as we are aware a unique
achievement for a barista from a national brand. All of us at coffeeheaven are
immensely proud of his success. It is a great endorsement not only of the talent
and skill of our baristas but to the quality of coffeeheaven's training
programmes that stand behind our brand.
Group Operations
The Group continues to make progress throughout central Europe ('CE').
At the date of the report the Group has 71 stores operating in 5 countries.
During the year we opened coffeeheaven stores in two new markets (Slovakia and
Bulgaria) and in the financial year to 31 March 2008 expect to add two further
markets (Romania and Hungary).
As shown elsewhere in the report, coffeeheaven continues to grow market share
across CE and to deliver increasingly robust financial success in our
established markets.
However, given our target of 350 stores across CE, and currently with sector
leadership in only two of our potential markets, the Group is still very much in
a development phase.
As mentioned earlier in the report, we are experiencing major changes in the
dynamics of coffeeheaven's markets. This is being driven by the economic success
of the CE region and by European Union membership.
In terms of operations, these changes are bringing not only strong sales
momentum but also upward cost pressures on materials, property rentals and
labour.
As the number of stores and markets expands, we continue to invest in our
international support group based in Warsaw.
As with many growing businesses, we face the challenge of maintaining the high
standards of customer service and product quality that have been key to our
success. In this respect the motivation and commitment of our in-store staff has
and continues to be crucial.
It has long been a goal of your Board to extend equity ownership in the Group to
a progressively wider base of our employees. We believe this is not only a
socially responsible step but one which is in the best interests of all
coffeeheaven's stakeholders - customers, employees and shareholders.
Subsequent to the year-end, we introduced the coffeeheaven Partner ProgramTM
covering all employees of the Group. Under this program, subject to qualifying
and vesting periods, all employees will have the opportunity to build over time
meaningful share ownership in the Group.
This is an innovative program within CE markets but one that we believe will
play an increasingly important role in the success and development of our
business.
Environmental issues are increasingly a matter for us all. At coffeeheaven we
have initiated environmental studies to quantify the Group's environmental
impact and to identify the most effective balancing counter measures. As a
practical first step to help offset the Group's carbon emissions, coffeeheaven's
reforestation program has already planted 12,000 new trees in southern Poland.
The competitive picture is changing in CE with the entry (or expected entry) of
some international coffee bar operators generally through franchise or similar
arrangements. The branded coffee bar market in CE is growing rapidly but still
remains relatively immature. We believe that quality competition will help to
expand our sector in CE markets faster than might otherwise be the case. As
market leader coffeeheaven should proportionately benefit from this expanding
market.
A large part of coffeeheaven's success stems from the quality of its employees.
Their dedication and enthusiasm has enabled coffeeheaven to grow from a concept
to a market leadership across CE in just six years. We are very fortunate to
have such colleagues. My own and the Board's thanks and appreciation go to them
all.
Group Financial Results
Group turnover for the year expressed in sterling for the 12 months to 31 March
2007 increased 58% to #10,071,792 (2006: #6,383,502).
Group EBITDA grew 305% to #924,576 (2006: #303,227 using 31 March 2007 exchange
rates).
Your Board believes that a truer reflection of the performance of the Group's on
going operating business is afforded by the measure 'Normalised' Group Profit/
(Loss) rather than Statutory Pre-tax Profit/(Loss).
'Normalised' profit is the Statutory Pre-tax Profit/(Loss) before adjustment (if
applicable) in respect of Goodwill, accounting standard FRS20 and Unrealized
exchange profits/(losses).
As shown in the Pro-forma Group Profit and Loss Account, Normalised Group Profit
before taxation for the year to 31 March 2007 was #207,990 (2006: loss #370,253
using 31 March 2007 exchange rates) and is stated before a first year charge of
#203,614 in respect of FRS20, #32,625 in respect of goodwill and #37,490 in
respect of unrealised exchange losses.
Administration costs for the trading subsidiaries are dealt with in the
individual market reports that follow. Details regarding Group overheads,
including corporate expenses are set out in the notes to the Pro-forma Group
Profit and Loss Account.
Group Financing
The Group's policy is to maintain a strong Balance Sheet through the current
growth phase.
Subsequent to the year-end, on 3 May 2007, the Group raised #3.9M (net of
expenses) though a Placing of new shares equal to approximately 8.2% of the
enlarged share capital at a placing price of 41p per share.
This new funding is and will be used to expand the Group's estate of stores and
where appropriate fund acquisitions.
Cash and cash equivalent at 31 March 2007 were #1.8M and at 31 July 2007 were
approximately #4.7M.
Foreign Exchange
Longer-term we anticipate that most of our markets in the CE region will adopt
the Euro.
Currently the Group operates with eight currencies being Pounds Sterling (GBP),
Polish Zlotys (PLN), Czech Koruna (CZK), Latvian Lats (LVL), Bulgarian Leva
(BGN), Slovak Crowns (SKK), Euros (EUR) and US Dollars (USD), each impacting the
Group's results in various ways.
Revenues of the Group are in PLN, CZK, LVL, BGN, and SKK. In each case there is
a material match between the currency of each operating company's revenue
stream, primary assets, debt and debt servicing (if applicable).
The Profit and Loss Account of the Group is converted from each local currency
at the exchange rate of the local currency against GBP at 31 March in each year.
The closing exchange rates between local currencies and GBP can therefore have a
material 'book effect' on the reported results of the Group although it does not
have any impact on the underlying trading results in local currency.
The closing rate comparison to GBP is as follows:
31 March 2007 31 March 2006
PLN 5.6867 5.6383
CZK 41.1960 40.8758
LVL 1.0360 0.9977
BGN 2.8770 2.8085
SKK 49.1340 54.5562
Generally our local market currencies have weakened during the year against GBP.
Overall this had a modest negative impact on the reported results in GBP for the
year to 31 March 2007 (estimated at less than 5%).
In the Group Pro-forma Profit and Loss Account comparative figures are all
restated using 31 March 2007 exchange rates to provide improved clarity on the
underlying performance of the business.
Each operating company in the Group incurs property lease rentals expressed in
either local currency, USD, or EUR. Thus the exchange rates between the USD/EUR
and the local currency in each market are of material importance since these
have a real (as opposed to 'book') cost impact.
Generally the Group does not use currency hedging. However at our principal
subsidiary, CHI Polska S.A. (CHIP), we have all USD and EUR denominated store
lease rentals fully hedged until 31 March 2008.
At CHI Czech s.r.o., we are considering hedging non-local currency store lease
rentals.
In other markets we will continue to keep our hedging options under review in
the light of market conditions.
In addition the Group carries on its Balance Sheet a number of long-term rent
and rent deposit assets held in USD and EUR. The combined effect of these items
is that an unrealised foreign exchange loss has been charged in the financial
statements for the year to 31 March 2007.
Individual Market Review
Poland
Store Sales and operating results - Poland
Store sales for the 12 months to 31 March 2007 increased 43% to #7.5M (2006:
#5.2M using constant 31 March 2007 exchange rates).
Like-for-like sales (note1) grew an outstanding 27% in the same period (2006:
10%).
Operating cash flow from stores increased 53% to #2.1M (2006: #1.4M using
constant 31 March 2007 exchange rates).
Operating results for all stores combined (note 2) are as follows:
Combined All Stores
2007 2006
Store operating profit as a 22% 18%
percentage of store sales (note 3)
Store operating cash flows as 28% 26%
percentage of store sales (note 4)
Notes
1. Like-for-like sales growth represents the sales percentage increase of
combined store sales for each 12-month period to 31 March compared to 'same
store' sales in the 12 month prior year period.
2. Store operating result represents the combined operating results of all
stores open in Poland as at 31 March in each year including the results of new
stores opened during each year.
3. Store operating profits include all direct and (where identifiable)
indirect operating costs associated with the operating of all stores including
depreciation.
4. Stores operating cash flow is store operating profit as in note 3 less
depreciation.
As the above data demonstrates, we are still experiencing strong profit growth
in Poland right across the estate. Many of our stores have yet to reach profit
and sales maturity.
In the year to 31 March 2007 combined cumulative capital expenditures for all
stores in our Poland estate represented 108 weeks (2006: 120 weeks) of actual
combined cash flow from all stores. Our KPI target is 100 - 200 weeks.
New Stores and Store Development - Poland
We opened 10 new stores during the year to 31 March 2007 bringing the estate to
40.
With most of the major retail projects now complete in Poland's largest cities,
many future new coffeeheaven stores are likely to be in smaller cities which
have increasingly become the focus of shopping mall developers. We will continue
to secure only the best positions in these new locations.
Subsequent to the year end we mutually agreed with NFI Empik Media & Fashion
S.A. to close the three test sites referred to in earlier reports. These units
proved to be commercially uneconomic.
New store openings in Poland during the year to 31 March 2008 are expected to
exceed the number of stores opened in the year to 31 March 2007. Several new
units have already been opened and others are contractually secured or are
subject to contract.
Financial Results - Poland
Sales for the year at CHI Polska S.A, ('CHIP') expressed in sterling for the 12
months to 31 March 2007 increased 43% to #7,466,731 (2006: #5,204,325 using
constant 31 March 2007 exchange rates).
CHIP EBITDA grew 70% to #1,468,618 (2006: #866,561 using 31 March 2007 exchange
rates).
As shown in the Pro-forma Group Profit and Loss Account on page 28, CHIP
increased pre-tax operating profits (before FRS20 adjustments) by 462% to
#982,090 (2006: #212,527 using 31 March 2007 exchange rates). This represents
13% of sales (2006: 4%).
Administration and other overhead costs for CHIP represent 8.6% of sales (2006:
9.7% using 31 March 2007 exchange rates). Administration expenses in the year
include the cost of moving to a new Head Office in the centre of Warsaw closer
to some of our stores.
Current Trading Update - Poland
Sales in the first 5 months of the current financial year to 31 March 2008 were
approximately #4.1M an increase of 47% over prior year same period.
Like-for-like sales growth for the same period was 18%.
Czech Republic
Store Sales and operating results - Czech Republic
Store sales for the 12 months to 31 March 2007 increased 240% to #1.7M (2006:
#0.7M using constant 31 March 2007 exchange rates).
Like-for-like sales (note1) grew a robust 39% in the same period (2006: 41%).
Operating cash flow from stores increased from close to zero in 2006 to #0.4M
(2006: #24K using constant 31 March 2007 exchange rates).
Operating results for all stores combined (note 2) are as follows:
Combined All Stores
2007 2006
Store operating profit as a 12% 11% (negative)
percentage of store sales (note 3)
Store operating cash flows 23% 2%
as percentage of store sales
(note 4)
Notes
1. Like-for-like sales growth represents the sales percentage increase of
combined store sales for each 12-month period to 31 March compared to 'same
store' sales in the 12 month prior year period.
2. Store operating result represents the combined operating results of all
stores open in the Czech Republic as at 31 March in each year including the
results of new stores opened during each year.
3. Store operating profits include all direct and (where identifiable)
indirect operating costs associated with the operating of all stores including
depreciation.
4. Stores operating cash flow is store operating profit as in note 3 less
depreciation.
Sales growth during the period was very strong as the coffeeheaven brand began
to gain traction in the market. Evolution of our Czech business is following
broadly the same pattern as we have experienced in Poland. As a result we are
starting to see strong growth in store operating profits and cash flows.
Our stores in the Czech Republic tend to be larger than in Poland and thus more
expensive to build. This is reflected in a generally higher depreciation charge
(11% of sales in the year) as opposed to our 'norm' of 6% - 7%.
New Stores and Store Development - Czech Republic
We opened 6 new stores during the year to 31 March 2007 bringing the estate to
12. This was less than the 8 new units we had planned in part because we opened
2 additional units in Slovakia. The Slovak market is for now operated by our
Czech management team.
To date we have 16 units trading in the Czech Republic with many more
contractually secured or subject to contract.
We expect to see a significant increase in the number of stores trading in the
Czech Republic by 31 March 2008.
Financial Results - Czech Republic
Sales for the year at CHI Czech s.r.o, ('CHIC') expressed in sterling for the 12
months to 31 March 2007 increased 240% to #1,650,794 (2006: #688,606 using
constant 31 March 2007 exchange rates).
CHIC EBITDA grew to #72,738 (2006: negative #87,316 using 31 March 2007 exchange
rates).
As shown in the Pro-forma Group Profit and Loss Account on page 28 , CHIC
reduced its pre-tax operating loss (before FRS20 adjustments) to #103,184 (2006:
#120,060 using 31 March 2007 exchange rates). Given the development stage of
this market this is a satisfactory result and is in line with your Board's
expectations.
Administration and other overhead costs for CHIC increased substantially in the
period representing 18% of sales (2006: 14%). This reflects infrastructure
enhancements to support a rapid store roll out. We expect to see overhead cost
increase further in the coming year but fall as a percentage of sales.
Current Trading Update - Czech Republic
Sales in the first 5 months of the current financial year to 31 March 2008 were
approximately #1.0M an increase of 83% over prior year same period.
Like-for-like sales growth for the same period was 28%.
Latvia
Store Sales and operating results - Latvia
Store sales for the 12 months to 31 March 2007 increased 73% to #0.9M (2006:
#0.5M using constant 31 March 2007 exchange rates of which only 10 months
(#0.4M) were consolidated).
Like-for-like sales (note1) grew 16% in the same period (2006: 20%).
Operating cash flow from stores increased significantly to #0.14M (2006: #24K -
10 months only).
Operating results for all stores combined (note 2) are as follows:
Combined All Stores
2007 2006
Store operating profit as a 8% 1%
percentage of store sales (note 3)
Store operating cash flows as 16% 5%
percentage of store sales (note 4)
Notes
1. Like-for-like sales growth represents the sales percentage increase of
combined store sales for each 12-month period to 31 March compared to 'same
store' sales in the 12 month prior year period.
2. Store operating result represents the combined operating results of all
stores open in Latvia as at 31 March in each year including the results of new
stores opened during each year.
3. Store operating profits include all direct and (where identifiable)
indirect operating costs associated with the operating of all stores including
depreciation.
4. Stores operating cash flow is store operating profit as in note 3 less
depreciation.
As indicated in earlier reports, we appointed a new Managing Director at CNL in
October 2006. Although this hand over was seamless, it has meant that we have
not made as much progress in developing this market as we would have liked. In
particular it has delayed plans for conversion of the store estate to the
coffeeheaven brand.
As indicated elsewhere in the report, the economic success of Latvia's economy
is now creating significant imbalances with high inflation and chronic labour
shortages.
New Stores and Store Development - Latvia
We opened 1 new store during the year to 31 March 2007 bringing the estate to 8.
During the current financial year we have opened one further store (our second
site at Riga Airport) and are considering a number of other locations. We have
also been reviewing the present estate and, as a result, expect to close one or
possibly two loss making units during the current year. The net financial impact
of any such closures will be positive.
Given the economic uncertainties (particularly in terms of real estate values
and rentals) we are for the time being taking a cautious approach to store
expansion in this market.
Financial Results - Latvia
Sales for the year at Coffee Nation Limited ('CNL') expressed in sterling for
the 12 months to 31 March 2007 increased 111% to #898,153 (2006: #423,734 10
months only using constant 31 March 2007 exchange rates).
CNL EBITDA was #28,674 (2006: #45,262 by 10 months only using 31 March 2007
exchange rates).
As shown in the Pro-forma Group Profit and Loss Account on page 28, CNL reduced
its pre-tax operating loss (before FRS20 adjustment) to #52,157 (2006: #66,412
10 months only using 31 March 2007 exchange rates).
Administration and other overhead costs for CNL represent 13% of sales (2006:
16% - 10 months only using 31 March 2007 exchange rates).
The significant absolute increase in Administration expenses represents the
impact of management and similar changes and is not expected to be repeated in
the current year despite a Head Office move to more suitable premises.
Current Trading Update - Latvia
Sales in the first 5 months of the current financial year to 31 March 2008 were
approximately #0.4M an increase of 27% over prior year same period.
Like-for-like sales growth for the same period was 9%. However, if the two loss
making units referred to earlier were excluded, like-for-like sales growth would
have been 17%.
All figures on pages 2 to 13 of the report are unaudited. Foreign exchange rates
used in relation to such figures are set out on page 9 of the report.
Bulgaria
We opened our first two stores in Sofia during the financial year to 31 March
2007 under a joint venture arrangement in which the Group had a 19% equity
interest. In the financial statements for the current year this interest has
been reported as Share in Associated Companies.
Trading at our first stores has been encouraging.
As a result, on 1 June 2007 the Group increased its equity interest in CHI
Bulgaria OOD to 100%. This was done primarily to give the Group greater
flexibility to increase the rate of new store openings in the Bulgarian market.
In the current year a further one store has opened and another is due to open
shortly. This will bring the estate in Sofia to 4 units.
Slovakia
During the year under review we opened our first two stores in Bratislava.
Current trading from these stores is now broadly in line with our expectations.
It may however be some time before we can significantly expand the coffeeheaven
estate in this market since many of the major new shopping mall developments are
still some way from completion.
However we see Slovakia, and in particular its capital Bratislava, as offering a
significant long-term opportunity for the Group and will be looking to expand
the number of stores as site opportunities arise.
Future new markets
We expect coffeeheaven stores to open in both Romania and Hungary during the
year to 31 March 2008.
In Romania, and subsequent to 31 March 2007, the Group increased its equity
interest in S.C. CHIR Cafe S.R.L. from 19% to 85%. The minority interest will be
held by S.C.Snack Attack S.R.L. one of Romania's leading fresh food
manufacturing companies. We believe this partnership will enable us to expand
faster in this market than would otherwise be the case.
We continue to explore the opportunities for opening stores in Ukraine. During
the year we invested considerable time and resources into this market. We have
already secured management that at present are gaining operational experience at
other coffeeheaven Group companies. However securing sites on a commercial basis
in the Ukraine market remains challenging.
Economies and Markets
The Group's target markets are those countries running north/south through the
centre of Europe from the Baltic States in the north to Bulgaria in the south
including Ukraine. This represents a total market of c.150 million people.
All current markets are members of European Union (EU). The economies of central
Europe are in a period of significant economic growth. In addition to increasing
GDP, they continue to receive substantial levels of direct foreign direct
investment together with infrastructure and other funding from the European
Union.
Country Population in Real GDP Estimated GDP year-on-year Estimated Estimated
millions year-on-year growth % consumer price unemployment %
growth % % growth end
2006 2007 2008 2007 2007
Poland 38.1 6.3 6.0 4.5 2.5 11.0
Czech Republic 10.2 6.1 5.6 4.8 3.5 7.3
Latvia 2.3 11.9 9.5 7.1 7.1 6.7
Bulgaria 7.6 6.1 5.7 5.6 4.6 7.7
Slovakia 5.4 8.3 8.5 7.0 2.0 8.0
Romania 21.6 4.1 5.2 5.6 7.0 6.0
Hungary 10.0 3.9 3.2 2.9 5.2 7.6
UK for 60.6 2.7 2.9 2.2 2.2 5.4
comparison
(source: national central banks/national statistical offices/BMI)
Economic Update
Poland
Poland is now experiencing its long awaited economic renaissance with strong and
seemingly sustainable, GDP growth. An IMF report recently noted that despite the
political uncertainties, Poland's economic prospects remain positive.
Perhaps the most impressive economic improvement has been in unemployment, which
has fallen from 18.2% in 2005 to a predicted 11.0% by the end of 2007. A
remarkable turnaround even though in part due to migration of workers to other
parts of the EU.
High levels of consumer confidence is now being reflected in spending with
retail sales growth up 16% in the first six months of 2007. However this robust
private consumption coupled with surging wage increases, pose considerable
inflationary risks. Labour shortages are already seriously impacting the
performance of many sectors of the economy.
Czech Republic
The Czech economy is also experiencing strong export led GDP growth further
supported by robust consumer spending.
As in other CE countries, we are seeing strong wage rate growth as employment
continues to fall. However consumers remain confident as is reflected in retail
sales growth of some 9%.
Latvia
Although Latvia's GDP growth is now one the highest in the world it is becoming
clear that the economy is operating above supply capacity. High inflation, acute
labour shortages and a deficit at some 26% of GDP together mean the country is
facing significant economic challenges.
Despite leading real estate advisors Collier International suggesting that
private housing prices in Riga could fall by 20% (with a knock-on to consumer
confidence) consumers still continue to borrow and spend.
Given the costs of changing the Lat 'peg' to the Euro, and the limited scope for
speculators to make a run on the currency, prospects of a Lat devaluation have
somewhat receded.
Bulgaria
Perversely Bulgaria's economy has seen an overall slowing of growth since EU
entry at the beginning of the year. However this appears to be attributable to
limited sectors such as energy - exports in (for example) consumer goods have
seen solid growth.
Although still early days, the country looks set to make very big gains from EU
membership as is evident from the economic boom now underway in the capital
Sofia and increasing tourism along the Bulgarian coast.
Slovakia
The Slovak economy is performing very strongly. Automotive investment is having
a positive impact across the country particularly on unemployment, which has
recently fallen to a record low of 8%. In the near future the country looks set
to become the largest motor manufacturer in the world per head of population.
Strong FDI flows look likely to continue and despite upward pressures, the
inflationary outlook remains positive (in May 2007 this was 1.5% - the lowest
level in the country's history).
This robust economic picture has strengthened the Koruna's value against the
Euro, boosting consumer spending as import costs fall. It now seems that
Slovakia will meet the Eurozone entry criteria in 2007 (one of the first of the
new European Union members to do so) leading to possible euro currency adoption
in 2009.
Our Responsibility to Society
coffeeheaven is proud to be one the first of now many businesses to support the
Foundation for Corporate Social Responsibility based in Poland.
The Foundation is not a charity. It is a group of member companies that formally
commit to meet standards of excellence in business ethics and to pool their
financial and intellectual capital to fight hunger and social injustice amongst
some of the youngest, most disadvantaged citizens of the European Union. The
Foundation is entirely dependent upon its members for its financial resources.
Since its inception in 2003 the Foundation has grown to more than 70 member
companies representing some of the largest local and international businesses
operating in Poland.
'Action not words' is the Foundation's credo.
Despite European Union membership and a booming economy, child poverty and
hunger is a national scourge in many of Poland's rural communities.
Today the Foundation, through the support of its members, provides 40,000 school
meals a month to some 2,000 of these children in 14 schools in northwest Poland.
It is not enough but it's a start. The goal is to extend this programme to more
than 10,000 such children.
For more information on the Foundation and its great work contact
chasey@ipgate.pl or visit the Foundation's website www.fcsr.pl
The Future
The current financial year has started well and sales revenues are in line with
your Board's expectations.
Headline Group sales for the 5 months to 31 August 2007 increased 59% to #5.0M
over the prior year same period. Group like-for-like sales growth for the same
period was 19%.
At the date of the report we have 71 stores trading in 5 markets. We expect to
open at least as many new stores in the year to 31 March 2008 as we did in 2007
(22 stores).
We expect our first stores to open in Bucharest and Budapest shortly.
As we continue to invest in new markets, we will be progressively expand our
international support structure as the Group approaches 100 stores in 7 or more
markets.
The Group remains firmly on track to achieve its longer term goals.
Your Board and our team of coffeeheaven Partners looks to the future with
confidence.
Richard D. Worthington
Executive Chairman
14 September 2007
Pro-forma Group Profit and Loss Account (unaudited)
For the year ended 31 March 2007 (unaudited)
Poland Czech Republic Latvia Other combined Group restated
Note 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Turnover Store-local 1 7,467 5,204 1,651 689 898 424 56 10,072 6,317
markets
Materials and all store operating
expenses excluding depreciation
-local markets (5,331) (3,810) (1,225) (665) (754) (400) (78) (7,388) (4,875)
Net cash inflows from store operations
-local markets 2,136 1,394 426 24 144 24 (22) 2,684 1,442
Administrative costs excluding 2 (642) (506) (303) (98) (116) (67) (15) (1,076) (671)
depreciation and interest-local
markets
Store pre opening costs-local markets 3 (25) (22) (50) (13) - (2) - (75) (37)
Net cash inflows from operations 1,469 866 73 (87) 28 (45) (37) 1,533 734
- local markets (EBITDA)
Depreciation store and other assets 4 (495) (452) (175) (87) (69) (18) (9) (748) (557)
-local markets
Interest (net) - local markets 8 25 (192) - (3) - (7) (1) 24 (202)
Other - local markets (17) (10) (1) 57 (11) 4 4 (25) 51
Profit/(Loss) for the financial period 982 212 (103) (120) (52) (66) (43) 784 26
-local markets before taxation (EBT)
Corporate expenses - International 5 (271) (125)
Corporate administration expenses - UK 6 (277) (241)
Acquisition and development expenses (43) (65)
Share of results of associate expenses 7 (20) -
Interests (net) corporate 8 35 35
* Normalised Group Profit/(Loss) 208 (370)
Charge in respect of the adoption of 9 (204) (49)
FRS20
Goodwill amortisation 10 (33) (25)
Unrealised foreign exchange losses 11 (37) (36)
Exceptional items 12 - (283)
Statutory Pre-Tax Loss (66) (763)
Taxation 13 (133) 20
Statutory loss after taxation (199) (743)
* Normalised Group Profit
The Statutory Pre-tax Profit/(Loss) for the Group is shown above. The Board
believes a truer reflection of the performance of the Group's on-going operating
business is afforded by the measure 'Normalised Group Profit/(Loss)'. This
measure excludes (where applicable) charges in respect of FRS20, Goodwill,
Unrealised foreign exchange profits/(losses) and Exceptional items.
The Pro-forma Group Profit and Loss Account and associated notes do not form
part of the statutory accounts and are therefore unaudited.
Notes to Pro-froma Group Profit and Loss Account
1. Turnover and expenses - local markets
Turnover and all expenses (other than those shown as UK) are received or
incurred in Polish Zlotys, Czech Koruna, Latvian Lats or Slovak Koruna and
coverted to pounds sterling at the rate of #1 = 5.6867 PLN, #1 = 41.1960 CZK #1
= 1.0360 LVL and #1 = 49.1340 SKK which were the rates in force at 31 March
2007. For comparability the 2006 results have been restated using the same 31
March 2007 foreign exchange rates
2. Administrative costs - local markets
This represents all overhead costs attributable to the business in local markets
only (excluding depreciation and interest)
3. Store pre-opening costs - local markets
This represents expenses on stores incurred prior to opening. Expenses incurred
prior to the first store opening in a new local market (where applicable) are
shown separately under Acquisition and development expenses.
4. Depreciation - local markets
This represents the total depreciation charge for all business assets in local
markets including non-store assets.
5. Corporate expenses - International
This represents remuneration and other costs incurred predominately in
supporting new local markets and certain Group marketing and operational support
services.
2007 2006
#'000 #'000
Salary and travel - international 102 18
Consultancy and related expenses - international 126 45
Administration and other expenses - international 43 62
Total international expenses 271 125
6. Corporate administration expenses - UK
This represents principally costs incurred as a result of the Company's public
listing on AIM, together with fees paid to the Directors for services as members
of the Board of coffeeheaven international pls. Costs (including fees, salaries
and expenses) of Directors who perform services in local markets are included
(if applicable) under Administrative costs - local markets.
2007 2006
#'000 #'000
Directors' fees for services rendered in the UK- 4 Directors 76 53
AIM, legal and other professional expenses - UK 97 91
Accountancy, administration and insurance - UK 56 54
Audit fees- UK 21 11
Other expenses -UK 27 32
Total UK expenses 277 241
7. Acquisition and development expenses
This relates to the development of and research on new markets as follows:
2007 2006
#'000 #'000
Latvia ( acquisition costs expensed) - 57
All other 43 8
Total Acquisition development expenses 43 65
8. Net interest receivable/ (payable)
Represents bank interest paid and received by individual Group companies. Prior
year, Poland also includes interest on bonds issued by CHI Polska S.A. and
repaid in December 2005.
9. Charge in respect of the adoption of FRS20
Under new accounting standard FRS20 the amount to be charged to the statutory
Profit and loss account for any period is based upon a time apportioned estimate
of the fair value of any financial instrument (in the case of the Company this
is options over shares in the Group - 'the Share Options') between the date of
grant and the date of vesting. This fair value figure is then adjusted by
making estimates of the number of participants holding Share Options that are
likely to be still employed by the Group at the vesting date and/or whether the
performance vesting criteria attaching to any of the Share Options are likely to
met. The resulting amount is then spread over the time period from the date of
grant to date of vesting of the Share Options with each corresponding profit and
loss reporting period being proportionally charged.
10. Goodwill amortization
This represents the amortisation charge for the period of good will created upon
the acquisition of SIA Coffee Nation, Lativa by the Group on 1 June 2005.
11. Unrealised foreign exchange losses
Represents unrealized foreign exchange losses on foreign currencies held for the
purpose of hedging foreign currency denominated store lease rentals and for
providing long-term store lease security deposits.
12. Exceptional items (prior year only)
This represents the difference between the issue price and redemption price of
bonds redeemed by CHI Polska S.A. in December 2005.
13. Taxation
The Group taxation charge for the year to 31 March 2007 relates principally to
CHI Polska S.A. and is based on actual corporate tax payments for the period.
Corporate taxes in Poland are paid monthly in arrears based on monthly returns.
Included in the Group tax charge is a deferred tax credit of #19,383 relating to
the share based payment charge.
Group Profit and Loss Account
For the year ended 31 March 2007
2007 2006
as restated
# #
Turnover 10,071,792 6,383,502
Cost of sales (4,734,671) (2,944,417)
Gross profit 5,337,121 3,439,085
Net operating expenses (5,397,430) (3,801,260)
Group operating loss (60,309) (362,175)
Share of operating loss in associates (19,644) -
Total operation loss- group and associates (79,953) (362,175)
Loss on disposal of assets (22,449) (16,573)
Revaluation of investment - 9,167
Other interest receivable and similar income 94,981 132,870
Interest payable and similar charges (59,558) (530,789)
Profit/ (loss) on ordinary activities (66,979) (767,500)
Tax on profit/(loss) on ordinary activities (132,877) 19,404
Retained profit/(loss) for the financial year (199,856) (748,096)
Loss per share (0.19p) (1.10p)
-Basic (0.19p) (1.10p)
-Fully diluted
The Group's turnover and expenses all relate to continuing operations.
Group Statement of Total Recognised
Gains and Losses
For the year ended 31 March 2007
2007 2006
as restated
# #
Profit/(loss) for the financial year (199,856) (748,096)
Currency translation differences (7,551) 148,203
Total recognised gains and losses relating to the year (207,407) (599,893)
Prior year adjustment (63,610)
Total gains and losses recognised since last annual report (271,017)
Group Balance Sheet
at 31 March 2007
2007 2006
as restated
Note # #
Fixed assets
Intangible fixed assets 489,650 511,908
Tangible assets 4,899,694 3,431,590
Investments - Associate 149,561 -
- Other 13,909 159,253
Total fixed assets 5,552,814 4,102,751
Current assets
Stocks 236,057 161,941
Debtors 1,113,367 733,194
Investments 175,675 178,361
Cash at bank and in hand 1,619,873 2,888,870
Total current assets 3,144,972 3,962,366
Creditors:
Amounts failing due within one year (1,390,398) (790,741)
Net current assets 1,754,574 3,171,625
Total assets less current liabilities 7,307,388 7,274,376
Creditors:
Amounts falling due after more than one year (6,513) (8,350)
Net assets 7,300,875 7,266,026
Capital and reserves
Called up share capital 1,068,783 1,062,487
Share premium account 8,055,118 8,023,101
Share based payment reserve 267,553 63,610
Other reserves 740,000 740,000
Profit and loss account (2,830,579) (2,623,172)
Equity Shareholders' funds 7,300,875 7,266,026
Company Balance Sheet
at 31 March 2007
2007 2006
as restated
Note # #
Fixed assets
Intangible fixed assets 63,990 51,700
Investments 76,126 76,126
Total fixed assets 140,116 127,826
Current assets
Debtors 8,595,017 6,886,154
Cash at bank and in hand 142,548 1,938,950
Total current assets 8,737,565 8,825,104
Creditors:
Amounts failing due within one year (117,481) (65,363)
Net current assets 8,620,084 8,759,741
Net assets 8,760,200 8,887,567
Capital and reserves
Called up share capital 1,068,783 1,062,487
Share premium account 8,055,118 8,023,101
Share based payment reserve 267,553 63,610
Other reserves 740,000 740,000
Profit and loss account (1,371,254) (1,001,631)
Equity Shareholders' funds 8,760,200 8,887,567
Group Cash Flow Statement
For the year ended 31 March 2007
2007 2006
Note # #
Net cash inflow/(outflow) from operating activities 1,111,773 762,680
Returns on investments and servicing of finance 35,423 (413,813)
Taxation (125,824) (10,693)
Capital expenditure and financial investment (2,313,538) (1,433,757)
Acquisition and disposals - (33,157)
Management of liquid resources 1,168 240,763)
(1,290,998) (887,977)
Financing 30,344 3,097,501
(Decrease)/increase in cash (1,260,654) 2,209,524
Reconciliation of net cash flow to movement in net funds:
(Decrease)/increase in cash in the period (1,260,654) 2,209,524
Cash inflow from decrease in liquid resources (1,168) (64,268)
Cash outflow from decrease in debt 4,672 3,022,437
Loans acquired with subsidiary - (342,330)
Foreign exchange differences (9,682) (113,649)
Change in net funds (1,266,832) 4,711,714
Net funds/(debt) at 1 April 3,062,380 (1,649,334)
Net funds at 31 March 1,795,548 3,062,380
Notes
1. The financial information set out in this preliminary announcement
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985.
The financial information has been extracted from the group's 2007 financial
statements. Those financial statements have not yet been delivered to the
Registrar, however the group's auditors have given an unqualified audit opinion
on those financial statements. The preliminary results have been prepared under
the historical cost convention in accordance with applicable United Kingdom
accounting standards.
2. Earnings per Share
Earnings per ordinary share is calculated as follows:
Basic 2007 # Fully diluted Basic 2006 Fully diluted
2007 # # 2006 #
Profit/(loss) attributable to ordinary shareholders 199,856 199,856 (748,096) (748,096)
Weighted
Weighted average number of ordinary shares 106,507,158 106,507,158 67,780,773 67,780,773
Earnings/(loss) per ordinary share (0.19p) (0.19p) (1.10p) (1.10p)
3. The Directors are not proposing that a dividend payment is made.
4. The 2007 Annual Report and Accounts will be posted to shareholders in
the next few days and will be available in electronic format at the Company's
website www.coffeeheaven.eu.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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