Sports Cafe Share Discussion Threads

[wiganer] 12/4/2007 11:49

Robin
So far SCA is striking me as more akin to FSH than to MacDonald's.
FSH ended up having to get a white knight to pump in cash via a deep-discounted placing.

[mike111d] 12/4/2007 11:48

It would appear though that trading has picked up post year end:

"Following a quiet start to 2007, sales have improved in March to the strong levels achieved in March 2006. As a result of the review of expenditure carried out at the end of 2006 both gross and operating margins for the quarter have improved compared to the corresponding period in 2006."

[robin_of_loxley] 12/4/2007 11:48

quite: at some point people stop being impressed by turnover and growth and start wondering when the profits will arrive, and whether that will happen before the access to funds to provide further growth dry up and banking covenants get close.

do we see slight differences between the sca approach and the ray croc approach so far wiganer?

no advice intended,

RoL
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[robin_of_loxley] 12/4/2007 11:45

not much growth in cash flow from operating activities: only around £100k

Decrease in cash over the period up by around 65% to 913k

While cash outflow on capital expenditure reduced by 67% to around 1615k


indicating to me that growth constrained by cash situation IMO....

[wiganer] 12/4/2007 11:42

They are using short-term borrowings, including trade creditors, to finance expansion. Which is fine, if they then produce profits. But they aren't! I can't therefore see their creditors continuing to be relaxed about the situation.

[robin_of_loxley] 12/4/2007 11:39

For a cash generative business, what happened:

from:

Consolidated Cash Flow Statement
for the year ended 31 December 2006

Cash flow statement

Cash flow from operating activities 1,186 prior:1,079

Returns on investments and servicing of finance (799) prior:(710)

Capital expenditure (1,615) prior:(4,963)

Cash outflow before management of liquid resources and financing (1,228) prior:(4,594)


Financing 315 prior:4,042

Decrease in cash in the period (913) prior: (552)

[wiganer] 12/4/2007 11:38

Net current liabilities are roughly 78 days takings.

So they really do have a cashflow problem.

[robin_of_loxley] 12/4/2007 11:33

Closing shareholders funds: £8,987k

Value of intangible assets on the balance sheet: £7,149k

hmmmm.....

[robin_of_loxley] 12/4/2007 11:29

malc26, just reading the accounts and commenting, reviewing my previous decision and looking at whether this may be good value, and whether I wanted to buy a few back.

my thread, I think its reasonable to discuss the results? Wiganer and I are having a pleasant chat, why spoil it?

no advice intended,

RoL
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[robin_of_loxley] 12/4/2007 11:28

"Current Trading Prospects

The expansion of the Sports Cafe estate during the last three years has created
a resilient, and cash generative operating base from which to expand the
business and generate earnings for shareholders. Following a quiet start to
2007, sales have improved in March to the strong levels achieved in March 2006.
As a result of the review of expenditure carried out at the end of 2006 both
gross and operating margins for the quarter have improved compared to the
corresponding period in 2006."

Cash generative, but not yet flwoing through to bottom line, and need to talk about managing to stay inside terms of banking conenants was hardly encouraging to me....personally had "overtrading" alarm bells ringing in my ears....

"On 1 July 2007 the smoking ban will be implemented in England and the Company is taking steps to minimise the possible impact of this event. It is anticipated that the sector as a whole will suffer a short-term decrease in sales of approximately 5% but that overall sales will return to previous levels within a three to six month period."

I suppose here, question is where is this projection based on (Irish experience? market research?) and is it directly comparable, and will it affect a sports bar estate in the same way that it would affect a family pub with a good resataurant for example. Impact may not be homogenous across the sector, not sure much will affect SCA until it happens.

"The Company looks forward to a strong year of sport during 2007, in particular
the Rugby World Cup to be held in France during an 8-week period in the autumn,
which is expected to give a boost to the Company's second half trading."

If first half is weak because of the smoking ban, and the rugby world cup doesnt provide a boost to second half 2007 figures, then that will not be a good sign. Suggests could be a risky hold over the next 12 months to me.

"The establishment of Sports Cafe's core eight site business generating positive
cash flow, together with the growth and acquisition strategy set out above
provides the company with good prospects for the current financial year and into
the future."

I suppose what will the growth strategy be, what will the funding requirements be, how will they be met, and what will the impact on banking covenants be...

no advice intended,

RoL
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[malc26] 12/4/2007 11:21

Pipe down Dobbin - this share is not worth the effort..

[robin_of_loxley] 12/4/2007 11:20

"The Board believes that Peter Marks will be a valuable addition to the Company
as we embark on a strategy to expand through organic and acquisitive growth,
including the potential integration of other operations. Peter has many years
of experience in consolidating groups within our sector and his experience in
this area will be valuable in executing the Board's strategy."

Hmmmm...interesting, but I presume they just mean buying up small operations, rather than buying big stuff.... after all would this be credible considering they seemed to me to be touting around to be bought out themselves just a few months ago?

no advice intended,

RoL
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[wiganer] 12/4/2007 11:17

"For the first seven years of the agreement, Kroc didn't draw a penny of salary"

I suspect SCA's Directors haven't been quite as shy at remunerating themselves...

[robin_of_loxley] 12/4/2007 11:05

wiganer, only know whats in accounts, just reading....some of my questions may seem silly by time I get to end, but hey, lets have a chat...

[robin_of_loxley] 12/4/2007 11:04

"Whilst the second half of 2006 restricted the short-term growth of the business
and prevented the Company from moving into profitability for the whole year"

how is slowing growth preventing the company moving into profitability - presumably its teh expansion thats front loading the costs ahead of the profits?

will read on....

[wiganer] 12/4/2007 11:03

Robin
Do you know what their fixed assets figure comprises? I.e. is their owned property in there as well as fixtures, fittings and equipment?

[robin_of_loxley] 12/4/2007 11:02

"Profit before Interest, Tax, Depreciation and Amortisation (EBITDA) from
continuing businesses was #1,387,000, compared with #980,000 in the previous
year."

"Operating loss from continuing operations reduced to #553,000"

ie lots of interest, tax, depreciation and amortisation chaps!

[robin_of_loxley] 12/4/2007 11:00

"Sales for the year ended 31 December 2006 increased by 29% to #18.2 million,
whilst like-for-like sales were at a similar level to that of 2005."

Like for like sales static

At least its not down, but for a young business, shouldnt this be still rising? Are they saying cant milk their existing estate any more? OK gross profits not bad at 74%, havent looked at whats below the line just yet....

Shows up the conflict between expansion and cutting costs

no advice intended,

RoL
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[robin_of_loxley] 12/4/2007 10:56

Wiganer, interesting, a new brand for a smaller style opportuity may be more easy to franchise.

[robin_of_loxley] 12/4/2007 10:54

"Given the fragmented market it is unsurprising that there has been a great deal
of consolidation and corporate activity in this sector during the last five
years and this activity is expected to continue in the foreseeable future."

Consolidation driven by what....difficult market?

Need to look at who the success stories are in the sector and why, and whether the model will change post smoking ban, and how SCA will be positioned for that.

Equally this could be read as saying that the boards game plan is to grow this up to a size where someone wants to bid for SCA. If thats the case, anyone can grow a loss making business, will need to see this make some profits.

no advice intended,

RoL
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[wiganer] 12/4/2007 10:52

RoL

In my view they may need to look at Franchising as the way forward, in the short term at least, for the reasons you cite. Maybe they could even look to convert some existing sites to franchises, which would help the cash situation.

So all is not doom and gloom, BUT the figures are BAD.

[wiganer] 12/4/2007 10:50

Does anyone know what the breakdown of the fixed assets is?