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RNS Number:1551Q
Caffe Nero Group PLC
25 September 2003
CAFFE NERO GROUP PLC
("Caffe Nero" or "the Group")
Preliminary Results for the year ended 31 May 2003
Caffe Nero Group plc, the largest independent coffee bar operator in the UK,
announces preliminary results for the year ended 31 May 2003, marking its sixth
consecutive year of sustained growth and its movement into pre-tax profit.
Highlights
* Turnover up 48% to #39.4m (2002: #26.6m), with like-for-like store sales
up 4%
* Store profitability increased 77% to #7.3m (2002: #4.1m)
* EBITDA increased by 277% to #4.2m (2002: #1.1m);
* Operating profit (before amortisation) jumped to #1.6m against a loss
last year (2002: #0.8m loss)
* Pre tax profit (before amortisation) was #1.0m (2002: #2.3m loss)
* Cash balances of #5.7m at year end, plus up to #5.0m of available bank
financing to fund continued expansion
* Rated the number one coffee bar brand in the UK by consumers for the
fourth consecutive year (Allegra Report 2003)
* Currently 131 stores operating in 42 UK towns and cities, confirming the
Group's position as the largest independent coffee bar operator in the UK.
Expect to have 160 stores by May 2004 (May 2003: 121 stores).
* Current trading is encouraging with revenues significantly up, positive
like-for-like sales growth and strong EBITDA profit increases.
Gerry Ford, Chairman and Chief Executive of Caffe Nero Group plc, commented:
"This has been an excellent year in which the Group has successfully delivered
both top-line growth and bottom-line profitability, whilst maintaining its
number one consumer ranking. These figures are testament to the fact that Caffe
Nero has clearly delivered its growth objectives and proven the coffee bar
model.
"The retail coffee sector continues to offer attractive prospects and Caffe Nero
enters the current year well positioned to capitalise on these growth
opportunities. Trading in the current year has started well; the Directors are
particularly encouraged by the performance of the Group's recent openings and
prospects for the sites in the Group's forthcoming pipeline."
25 September 2003
ENQUIRIES:
Caffe Nero Group Plc. Tel: 020 7457 2020 (Today)
Gerry Ford, Chairman & Chief Executive Tel: 020 7520 5150 (Thereafter)
Ben Price, Finance Director
College Hill Tel: 020 7457 2020
Justine Warren
CAFFE NERO GROUP PLC
Preliminary Results for the year ended 31 May 2003
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that in the Financial Year ended 31 May 2003 (FY2003),
Caffe Nero Group plc ("the Group") achieved excellent results. It was a year of
strong revenue growth, of record cash flow profit (EBITDA), and of the emergence
of bottom-line Group profitability. Additionally, our brand continued to be
rated number one by UK coffee consumers and we were able to solidify our
strategic position--becoming not only one of the three dominant UK coffee house
players, but, amongst the three, the brand growing market share the fastest. In
short, this past year's performance reinforces that Caffe Nero is a fast growing
and profitable retail roll-out business, which is gathering momentum.
Financial Performance
Our financial numbers for the 12 months ended 31 May 2003 were strong. Sales
for the year increased by 48% to #39.4m (2002:#26.6m) and like-for-like store
sales were above the average for high street retailers, coming in at positive
4%.
While revenues increased substantially, our cost management remained
disciplined. The result was that Caffe Nero's store profit (profit before
central overheads) grew sharply for the second year in a row, rising by 77% to
#7.3m (2002:#4.1m).
During the year, only marginal increases in central overheads were necessary,
consequently Caffe Nero's cash flow profit (EBITDA) rose by a notable 277% to
#4.2m (2002:#1.1m). This significant jump reflects the following: having
reached a threshold size, our business model is more efficient, meaning that a
large portion of each new store's profit now flows down to the Group's profit
line.
The Group's Operating Profit before Amortisation of Goodwill and Exceptionals
also improved markedly. It moved to a profit of #1.64m in 2003 (2002: loss of
#798k).
Finally, and perhaps most importantly, Caffe Nero recorded profit at the pre-tax
line, well in advance of market expectations and whilst operating in a difficult
trading environment, including slow macro-economic growth and the Iraq War. The
Group's adjusted pre-tax profit (before Amortisation of Goodwill) came in at
#1.015m, whilst its non adjusted pre-tax profit was #519,000. These results
mark a watershed year for Caffe Nero: they show a business able to deliver both
exceptional top-line growth and bottom-line profitability.
Balance Sheet and Funding
At yearend 31 May 2003, Caffe Nero's cash balances stood at a healthy #5.7
million. Net debt was #5.4m (conservative when compared to last year's EBITDA
of #4.2m).
For the current year, FY2004, in addition to the #5.7 million cash deposit, the
Group should gain access to a further #5 million in debt plus whatever funds are
generated internally. In July 2002, Caffe Nero changed banks, moving to Bank of
Scotland, and, in so doing, negotiated a further loan facility of up to #5
million, which has yet to be drawn on. The Group generates cash through its own
operation, and at today's rate more than #4 million would be available in the
year.
Combining these elements, for the current year (FY2004) we anticipate that Caffe
Nero should have a total of approximately #15 million available, more than
sufficient to finance a continuation of its organic roll-out programme.
Other Developments
Brand
Caffe Nero is a European-style coffee house brand serving high quality espresso
based coffee, and top quality Italian deli food that changes throughout the day.
Increasingly, our brand and offering are becoming well recognised and regarded
nationally. Brand awareness for Caffe Nero among coffee consumers reached 67%
last year, undoubtedly driven by the fact that today we operate in 42 UK towns
and cities and serve approximately 50,000 customers a day.
Caffe Nero's brand strength also remained firmly intact over the past year. Our
brand was chosen as the favourite of UK coffee consumers (the Allegra report on
coffee 2003) for the fourth consecutive year. Not only were we ranked number
one overall, but Caffe Nero came out top among the major brands in each of the
key individual sub-categories: coffee quality, service, atmosphere and food
offering.
While our brand awareness has grown and our reputation has remained high, over
the past 12 months the competitive landscape for the UK retail coffee market has
also become much clearer. Three brands now stand out amongst the rest as the
dominant players: Caffe Nero, Starbucks and Costa Coffee. These three represent
58% of the UK branded market. The two growing market share the fastest are
Caffe Nero and Starbucks, which may reflect that the UK retail coffee market
seems to have divided into two segments: a European offering and a North
American offering - with Caffe Nero the highest rated by consumers on the
European side and Starbucks on the North American side.
Stores
During FY2003, Caffe Nero opened 18 sites and sold five ex-Aroma outlets, taking
our total store numbers from 108 to 121 outlets. This was a slower roll-out
schedule than originally anticipated, held in check by the prospect of acquiring
Coffee Republic. However, in late 2002, once we decided not to move forward in
the short term with Coffee Republic, our organic roll-out programme returned to
full speed.
Our roll-out programme currently reflects a two pronged strategy: (1) build up
clusters of sites in larger urban areas, and (2) target smaller, desirable,
regional towns. For example, in the greater Manchester area we now have nine
stores; in Scotland, after opening four stores in FY2003, we have a total of
seven outlets; in greater Birmingham, our store numbers are up to four; and, in
the Leeds area we currently have three sites.
Likewise, we are trying to build up our presence in smaller regional towns.
Stores such as those in Worthing, Chesham, Maidstone, Durham and Rickmansworth
fit into this mould.
Management
On behalf of the Board, I would like to thank all our employees for their hard
work and commitment this past year. We now have approximately 1,100 employees
from 53 countries, and over the last twelve months they have pulled together in
an impressive fashion to achieve these notable results.
Additionally, on 22 September 2003, Chris Reeve stepped down from the Caffe Nero
Group Board. The Board would like to extend its gratitude to Chris for his
commitment to the Group over the past three years. Chris oversaw Store
Operations, HR and Training, and we wish him well in the future.
The UK Retail Coffee Market
For the last six years, Caffe Nero has participated in one of the fastest
growing niche retail segments in the UK: the retail coffee sector. While
observers have routinely predicted the sector's demise or saturation, the
reality has been very much the opposite: explosive growth. As the smoke clears
over the coffee sector, the facts stand out. The average compound growth for
the last five years for the branded segment has been a remarkable 37%. This has
created a UK market value for the branded retail coffee area of approximately
#540 million.
Allegra Strategies, the UK coffee industry experts, predict strong future growth
as well: the branded segment will grow by a robust 11% per annum for at least
the next few years, if not longer, and branded cafes will continue taking market
share from independents. Allegra also forecasts that the branded UK coffee
market will reach #1 billion within a few years. All of this is good news for
Caffe Nero.
Current Trading
Caffe Nero is off to an encouraging start to the current year, FY04. Trading
for the First Quarter (Jun-Aug 03) is up by approximately 20% on the equivalent
period last year, and like-for-like store sales remain single-digit positive.
We are also optimistic about the remainder of the year; there are currently some
real opportunities in the retail property market. More retail sites are
available at more reasonable prices than at any time since we started Caffe Nero
in 1997. Given the success we have had so far with our brand, we are diligently
trying to take advantage of these numerous property opportunities.
Proof of this is that we have already opened 10 new stores in the first 15 weeks
of our current financial year. The results have been extremely positive.
Recent successes include: Canary Wharf-London, Selfridges-Birmingham,
Winchester, Highgate-London, Maidstone, Glasgow-Airport and Watford.
In addition, we recently negotiated the purchase of three Coffee Republic sites
(two in London and one in Leeds) which we believe will become successful under
the Caffe Nero banner. Likewise, we are excited about opening our seventh
airport site, this one at Gatwick (due to commence trading in November 2003) and
we are currently in construction on three sites: Preston, Bournemouth and Tower
Bridge-London.
At a glance, our estate currently stands at 131 stores and, at our present pace,
we are on target to have 150 stores trading by January 2004.
Future Prospects
Caffe Nero is now well positioned to have another outstanding year. The reasons
are: (1) the UK retail coffee sector is still growing strongly, (2) Caffe Nero
is the number one rated brand with consumers, (3) the current retail property
market is awash with available space, and (4) Caffe Nero has sufficient funds to
continue to finance its roll-out. Hence, we anticipate the coming year will
bring further strong top-line growth and increased bottom-line profitability.
Our goals for this year therefore are: (1) to retain a high consumer rating for
our brand, (2) to achieve our Profit and Loss objectives, and (3) to grow our UK
estate to a level that will enable Caffe Nero, through its own cash-flow, to
self-finance (at a rate of 35-40 stores per annum) all further UK stores. If
these goals are met, this year will be another major step forward for Caffe Nero
and its shareholders.
CAFFE NERO GROUP PLC
Preliminary Results for the year ended 31 May 2003
Group Profit & Loss Account for the year ended 31 May 2003
Notes 2003 2002
Total Total
#'000 #'000
Turnover 39,396 26,581
Cost of sales (32,096) (22,451)
Gross profit 7,300 4,130
Administrative expenses before depreciation, (3,124) (3,022)
impairment of tangible fixed assets, amortisation
and operating exceptional items
EBITDA profit 4,176 1,108
Administrative expenses - depreciation and (2,538) (1,906)
impairment of tangible fixed assets
Operating profit/(loss) after depreciation and 1,638 (798)
impairment of tangible fixed assets but before
amortisation and operating exceptional items
Administrative expenses - amortisation (496) (386)
Administrative expenses - operating exceptional - (1,103)
items
Total administrative expenses (6,158) (6,417)
Operating profit/(loss) (after depreciation, 2 1,142 (2,287)
impairment, amortisation and operating exceptional
items)
Bank interest receivable 130 133
Interest payable and similar charges
- Interest payable (706) (452)
- release of issue costs and other fees of debt (47) (71)
restructuring
(753) (523)
Profit /(loss) on ordinary activities before 566 (1,503)
exceptionals & taxation
Profit/(loss) on ordinary activities before 519 (2,677)
taxation
Tax on profit/ (loss) on ordinary activities - -
Profit/(loss) for the financial year 519 (2,677)
Earnings per share - basic (pence) 3 0.76p (3.96p)
Earnings per share - diluted (pence) 3 0.76p (3.96p)
There are no recognised gains or losses other than as shown above
CAFFE NERO GROUP PLC
Preliminary Results for the year ended 31 May 2003
Group Balance Sheet at 31 May 2003
2003 2002
#'000 #'000
FIXED ASSETS
Intangible assets 3,238 3,716
Tangible assets 16,168 14,900
Fixed asset investments 854 -
20,260 18,616
CURRENT ASSETS
Stocks 340 298
Debtors 1,341 1,736
Cash at bank and in hand 5,667 4,114
CREDITORS: amounts falling due within one year (8,203) (11,310)
NET CURRENT LIABILITIES (855) (5,162)
TOTAL ASSETS LESS CURRENT LIABILITIES 19,405 13,454
CREDITORS: amounts falling due after more than one year 10,562 4,972
PROVISIONS FOR LIABILITIES AND CHARGES 595 758
8,248 7,724
CAPITAL AND RESERVES
Called up share capital 341 338
Share premium 9,390 9,388
Other reserve 6,249 6,249
Profit and loss account (7,732) (8,251)
Shareholders' funds: Equity 8,248 7,724
CAFFE NERO GROUP PLC
Preliminary Results for the year ended 31 May 2003
Group Statement of cash flows for the year ended 31 May 2003
2003 2002
Notes #'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 2 3,544 2,413
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 130 133
Interest paid (642) (443)
Issue costs of new long-term loans (156) (93)
(668) (403)
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (2,859) (6,152)
Payments to acquire Coffee Republic Shares (854) -
(3,713) (6,152)
ACQUISITIONS AND DISPOSALS
Purchase of the business of Aroma Limited 298 (755)
Net overdraft acquired with Aroma Limited - (1,785)
298 (2,540)
NET CASH OUTFLOW BEFORE FINANCING (539) (6,682)
FINANCING
Issue of ordinary share capital 5 2
Share issue costs - (224)
New long-term loans 11,200 4,500
Repayment of long-term loans (9,113) (452)
2,092 3,826
INCREASE /(DECREASE) IN CASH 1,553 (2,856)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2003 2002
#'000 #'000
Increase /(Decrease) in cash 1,553 (2,856)
Cash inflow from new long term loans (11,200) (4,500)
Repayment of loans 9,113 452
Issue costs of long-term loans 156 93
Change in net (debt)/funds resulting from cash flows (378) (6,811)
Other non-cash movements (67) (135)
MOVEMENT IN NET DEBT (445) (6,946)
NET (DEBT)/FUNDS AT 1 JUNE (4,950) 1,996
NET DEBT AT 31 MAY (5,395) (4,950)
CAFFE NERO GROUP PLC
Preliminary Results for the Year ended 31 May 2003
NOTES
1. The above results for the year ended 31 May 2003 are audited.
2. RECONCILIATION OF OPERATING PROFIT/LOSS TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2003 2002
#'000 #'000
Operating profit / (loss) 1,142 (2,287)
Amortisation 496 386
Depreciation 2,408 1,828
Impairment of tangible fixed assets 130 78
Exceptional - write off of fixed assets of Aroma Limited - 265
Increase in stocks (42) (131)
(Increase) in operating debtors and prepayments (8) (862)
(Decrease)/Increase in operating creditors and accruals (169) 2,446
(Decrease)/Increase in Provisions for liabilities and (413) 757
charges
Other non -cash Movements - (67)
3,544 2,413
3. EARNINGS PER SHARE
The calculation of the earnings per ordinary share for the year ended 31
May 2003 is based on a profit of #519,000 (2002 - #2,677,000 loss) and
68,103,720 (2002- 67,593,035) ordinary shares, being the weighted average
number of ordinary shares in issue during the year.
In 2003 the result attributable to ordinary shareholders and the weighted
average number of ordinary shares for the purpose of calculating the
diluted earnings per ordinary share are identical to those used for basic
earnings per ordinary share. This is because the average share price during
the year was 24.05p which is below the exercise price of any of the share
options in issue. In 2002 the loss attributable to ordinary shareholders
and the weighted average number of ordinary shares for the purpose of
calculating the diluted loss per ordinary share are identical to those used
for basic loss per ordinary share. This is because the exercise of share
options would have the effect of reducing the loss per ordinary share and
is therefore not dilutive under the terms of FRS14.
4. STATUTORY INFORMATION
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 May 2003 or 31 May
2002 (but is derived from and has been prepared on the same basis as, those
financial statements). Statutory financial statements for Caffe Nero Group
Plc for the year ended 31 May 2002 have been delivered to the Registrar of
Companies, and those for the year ended 31 May 2003 will be delivered
following the Company's Annual General Meeting. The auditors have reported
on those financial statements; their reports were unqualified and did not
contain statements under section 237 (2) or (3) of the Companies Act 1985.
CAFFE NERO GROUP PLC
Preliminary Results for the Year ended 31 May 2003
NOTES (cont'd)
5. ANNUAL REPORT AND ACCOUNTS
The statutory accounts for the year ended 31 May 2003 will be finalised on
the basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. Copies will be
sent to shareholders shortly and will also be available on request from the
Company Secretary Ben Price at 3 Neal Street, London, WC2H 9PU. The Annual
General Meeting is to be held on 12 November 2003 at 10am at College Hill,
78 Cannon Street, London EC4N 6HH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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