Coffee chain boss attacks websites over buyout rumours
The boss of Coffee Republic today condemned internet bulletin boards for moving the price of the firm’s shares and damaging progress as it rolls out its franchise programme.
The coffee bar and deli chain saw its share price double to 4p earlier this month following speculation that management were planning a buyout of the firm but fell back after it issued a denial.
Some franchisees considering a deal with Coffee Republic have been put off due to the uncertainty surrounding the group, chairman Bobby Hashemi said.
London-based Coffee Republic was forced into a painful restructuring after trading suffered in the wake of the economic and tourism downturns of 2001.
Its estate was halved while new equity and banking facilities were secured to improve the group’s financial stability.
The firm has been moving towards a deli format – offering fresh sandwiches and hot food counters as well as coffee – in a bid to cut exposure to competition from rivals such as Starbucks, Costa Coffee and Caffe Nero.
Mr Hashemi said the rollout of the firm’s deli concept through franchising over the summer had been progressing well and ahead of schedule but has recently been hampered by speculation on websites, such as advfn.com, which provide investors with share tips.
“Despite trading statements from the company that trading was in line with expectations, speculation on internet bulletin boards has insisted that this is not true, and that management is suppressing good news,” he said. “The audited results show that the company’s trading statements were true and accurate and that the speculation was unfounded.
“In addition, despite repeated denials by the company, speculation has continued that management plans a buyout of the company.
“Let me make this as clear as I can: there was no management buyout plan and there is no management buyout plan.”
Mr Hashemi said he felt for investors who had bought into the group at its higher share price and who have lost money through no fault of the firm.
His comments came as the group posted net losses of £1.45m (€2,15m) for the year to March 26 compared with losses of £1.4m (€2.07) a year ago.
Like-for-like sales have improved in the past eight weeks with a 3.6% rise.
Coffee Republic now has 44 bars – 14 franchised along the deli concept and the rest company-operated coffee bars.
David Stoddart, analyst at Teather and Greenwood, said progress was ahead of expectations but added that speculation has damaged its franchising progress.
“Since franchising is the principal source of growth, this will slow the financial recovery this year, resulting in the reduction in our estimates,” he said.
“The cut in numbers on the one hand, and the recognition that the uncertain background hinders the company’s ability to sustain its recovery, results in a downgrade in recommendation to hold.”
Shares were down almost 4% today to 2.19p.
