Final Results

RNS Number:6583O
Coffeeheaven International PLC
14 August 2003


                         coffeeheaven international plc

                 Final Results for the Year Ended 31 March 2003

HIGHLIGHTS

* Sales more than double to #1.49M against prior year same period.

* Number of stores open doubles during year. Total now 22:Open(14) Contracted(8)

* Like-for-like sales growth 31% for 12 months to 31 March 2003.

* Trading subsidiary reports maiden profit for 12 months to 31 March 2003.

* Entry to second Central European market announced.

*#2,300,000 public bond issue in Poland (Series 'A').

*#288,000 fundraising completed to redeem Preference Shares.


EXECUTIVE CHAIRMAN'S STATEMENT

INTRODUCTION

I am pleased to present a maiden full year report for coffeeheaven international
plc ('the Group' or 'the Company') following the demerger of the Company's only
trading subsidiary, CHI Polska S.A. ('CHIP'), from Bakery Services plc, its
acquisition by the Company and the Company's subsequent admission to the
Alternative Investment Market of the London Stock Exchange ('AIM') in December
2001.

The period under review has been one of progress and success.

All key objectives of the Group for the year to 31 March 2003 have been met.

In Poland, CHIP's sales in Polish zlotys increased 104% over the prior year same
period.

Like-for-like store sales grew by an impressive 31% during the 12 months to 31
March 2003.

As at 31 March 2003 the number of operating stores had doubled to 12 with a
further 2 stores opened shortly after the year end (projections in the Company's
Admission Document to AIM dated 5 November 2001 were 13 stores by June 2003).

CHIP reported a maiden post tax profit and generated meaningful cash flows from
operations as shown in the Pro-forma Group Profit and Loss Account.

However events most significant to the future of the Group took place shortly
after the year end. These were:

   *In May 2003, CHIP successfully completed an issue of 14M Polish zlotys
    (approximately #2.3M) of fixed interest 5-year non-convertible bonds (Series
    'A' out of a total authorised issue of 20M Polish zlotys - approximately
    #3.3M) onto the public bond market in Poland. As set out in my statement
    dated 23 September 2002, securing longer term financing to build new stores
    during 2003 and beyond was the most critical priority for your Board.
    Success with the bond issue, on what your Board believes to be favourable
    terms against a background of depressed capital markets world wide,
    underlines the recognition and credibility the coffeeheaven brand has
    achieved in Poland. Importantly the success of this issue not only secures
    the capital required to build the target 50 stores in Poland by the end of
    2006 but does so without further significant equity dilution for
    shareholders.

   *In June 2003, in a historic referendum, the Polish people voted by a
    large majority to join the European Union ('EU') on 1 May 2004. Your Board
    believes that this, together with the same positive vote by other
    prospective EU market entrants in Central Europe, will have a major positive
    impact on the Group's future. These votes mean that many of the Company's
    target markets in Central Europe will, after May 2004, be members of the EU.

   *In July 2003, the Company committed to market entry into the Czech
    Republic. This will give the Company a presence in a second major Central
    European market and one that, your Board believes, is among the most
    commercially attractive in the region.

   *In August 2003, an Extraordinary General shareholders meeting voted in
    favour of a buy back and subsequent cancellation of the Company's
    outstanding #990,000 non-redeemable preference shares for a consideration of
    #250,000. This has strengthened the Group's balance sheet, removed a
    significant contingent dividend burden on future earnings and made the
    Company more attractive to capital markets.

I comment further on all of the above matters later in this report.

The content of this report is focused on providing shareholders with as complete
a picture of the Company's current business as is commercially prudent. We feel
this continues to be important in the light of persistent negative UK press
comment on the UK coffee bar market in general and the financial performance of
the sector in particular.

We feel it necessary to continue stressing that the markets of Central Europe
are very different from that of the UK and importantly coffeeheaven has been
developed with the 'hindsight benefit' of UK market experience.

These points of market difference may be summarised as:

Markets

* Target market (Central Europe) 100 million inhabitants, almost twice the UK.
* Immature but growing market segment.
* Few 'branded' cafes with no 'chains' of any size.
* No significant operators in market sub-segments (i.e. sandwich, soups etc).
* Substantial new retail space construction being progressed by international
developers.

Brand/Company

* Brand focused on both coffee and food from the start.
* Financial resources in place to achieve planned development targets.
* Financially robust store operating model.
* Rapid store investment payback.
* Lean overhead cost model.

Notwithstanding the considerable financial resources now available to the
Company following the successful bond issue, the Group is continuing a prudent
policy of 'parallel infrastructure investment' - that is to build the support
structure of each operating company in line with, rather than ahead of, sales
growth. Although this could result in slower growth than might otherwise be
achieved, such a policy is essential to maintain performance against our key
operating benchmark of month-to-month positive cash flows from trading
operations throughout the growth period.

With the Group's present capital needs secured and target markets likely to
become increasingly more integrated following EU enlargement, the business is
well placed to benefit from Central Europe's 'catch-up economies'.

None of the success to date would have been possible without our enthusiastic
and highly dedicated colleagues in Poland. We have a terrific team at CHIP led
by Michael Ovadenko, Managing Director and Maciej Jania, Financial Director. The
Board's thanks and appreciation go to them all for these results.


OVERVIEW

The Company's only business is operated through its wholly-owned subsidiary CHIP
in Poland.

The financial results in this report cover the 12 month period to 31 March 2003.
However in the statutory statements, comparative figures cover only a 4 month
period from 29 November 2001 (the date that the demerger of CHIP from Bakery
Services plc and its acquisition by the Company became effective) to 31 March
2002 the end of the Group's first accounting period.

To provide further clarity to the financial results and enhance understanding of
the progress of the business, we have included on page 22 of this report an
unaudited Pro-forma Group Profit and Loss Account. This covers the 12 month
trading period to 31 March 2003 and provides comparatives for the 12 month
period to 31 March 2002 (unaudited).


OPERATIONS AND DEVELOPMENT - Poland

Brand

The coffeeheaven brand continues to build awareness and customer loyalty. This
was demonstrated when our customers voted coffeeheaven No. 1 coffee bar in the
'The Best of Warsaw 2002' consumer survey by Warsaw Insider Magazine. (The 2003
survey has not been completed at the date of this report).

Repeating our success in 2002, coffeeheaven literally swept the board by taking
1st, 2nd and 4th places in the highly competitive 2003 Polish round of the World
Barista Championships held in Warsaw during March 2003. We were particularly
pleased that 4th place was taken by Magda, a staff member from our store at the
Sadbya 'Best' Mall shopping centre. A superb performance by our three winners
and a great endorsement of coffeeheaven's coffee quality and training standards.
In April 2003, Grzegorz, who won 1st place, went on to represent Poland at the
World Championships in Boston USA competing against Baristas from 39 countries.

Long term development and investment in the coffeeheaven brand continues to be a
major focus for the Group.


Sales

Sales growth remained strong throughout the year.

Like-for-like sales grew an impressive 31% in the 12 month period to 31 March
2003. (4 months to 31 March 2002 + 30%).

In the current year (4 months to 31 July 2003) there has been a marked slowing
of total like-for-like sales growth rates to 23%. This results from a number of
factors (including exceptionally warm Spring weather) which appears to have
reduced customer footfall in many shopping centres. By comparison, during this
same 4 month period, stores with open air seating (2) maintained a like-for-like
sales growth rate of 32%.

However it must be recognised that at some point rates of underlying
like-for-like sales growth will slow. As of today your Board believes that this
point has not yet been reached but that it will occur for two key reasons.

   *development of 'local' (and conceivably international) competition as the
    market expands.

   *and, most significant of all, the likely (but we believe temporary)
    cannibalisation of sales as the huge investment in 'green field' retail
    space comes on line throughout Poland over the next 3 years. This important
    factor is expanded upon later in this report.


Stores

At the date of this report, CHIP has 14 stores trading and a further 8 sites
under contract - a total of 22 sites. With many more sites are under
negotiation, the Company is well placed to meet its target of 50 stores in
Poland by end 2006.

The location of sites remains critically important to the success of CHIP in
these developing markets. Unless there are very compelling strategic reasons to
do otherwise, coffeeheaven stores are only opened in prime retail locations.

All stores but 1 outside the post opening period are currently operating
profitably. This excludes our store in Gdansk which is subject to an insurance
claim as described below. The 1 store where profitability has not been reached
is due to specific temporary factors not totally within the control of CHIP and
is being addressed with the hypermarket operator concerned.

The actual combined investment payback rates for all stores based on the results
for year ended 31 March 2003 was less than 100 weeks.

However, as indicated in our Interim Statement, payback benchmarks for new
stores, particularly those outside Warsaw, are being significantly extended.

There are four reasons for this:

   *longer customer education curve outside the capital Warsaw (i.e. what
    coffeeheaven is all about, the 'take away' coffee concept etc.).

   *time required to build local brand awareness outside Warsaw.

   *based on trading experience and market development, CHIP is now generally
    building larger and thus more costly stores.

   *high street stores (i.e. those located outside shopping malls which are
    likely to increase in number as coffeeheaven's market penetration grows)
    generally appear to take longer to build sales.

Our store in Gdansk, opened in May 2002, and located in a new hypermarket
centre, had to close for a period during the year. This was due to structural
problems with the building unconnected with CHIP. Although part of the resulting
losses have been and continue to be recovered under CHIP's consequential loss
insurance, the coverage within Poland given to these structural problems has in
our view blighted the centre for the foreseeable future. Although we are
discussing the effects of this with the hypermarket operator and our insurers,
coffeeheaven's ongoing future at this location remains in doubt. Although to
date this has had only a small negative financial impact on CHIP, the store
remains a non-performing investment for which there is no immediate management
solution.

As indicated in previous reports, the focus of site development has switched
this year to locations beyond the capital Warsaw, making coffeeheaven a national
brand.

The roll out strategy remains that of building clusters of stores in each city
or large area of population. This enhances efficiencies in operations and the
building of brand awareness. All stores continue to be built to the same
exacting standards throughout Poland, providing a 'one world' brand offering.

Our target to be represented in Poland's top 5 cities by December 2003 has
already been met.

CHIP is currently represented in 6 cities in Poland - Warsaw, Gdynia, Gdansk,
Krakow, Wroclaw, and Lodz. By 31 March 2004, based on new sites already
contracted, we expect to have added a further 4 key cities to this list.

The rate of store build in the current financial year has slowed compared to the
12 months to 31 March 2003. There are a two principle reasons for this:

   *the bond issue in Poland took two months longer to complete than planned.
    Without this funding being secured, it was not prudent for CHIP to commit to
    capital spending beyond its (then) available resources. As a result the
    window of opportunity for some potential sites was lost.

   *for various reasons, a number of sites planned for the current year have
    been temporarily put back by developers and/or owners. So far as we are
    aware these sites are still available (and in some cases are contractually
    secured) but opening dates are now likely to stretch into next year.

In summary, whilst the contracted site 'order book' remains solid and on plan,
the number of new sites that can actually be opened as stores this year is now
uncertain.

In the current year 2 new stores have already been opened and a further 4 are
scheduled for build between September and November 2003. We need to schedule a
further 4 units for build before 31 March 2004 to meet our target of 10 new
stores in the year to 31 March 2004.

Although negatively impacting short term results, we do not believe that these
delays will significantly effect the business long term.


Product and Product Supply

Considerable investment and effort has been focused (and continues to be
focused) on improving coffeeheaven's product offerings both in terms of
innovation and quality.

In many cases this has meant sacrificing margins short term through the
promotion of these new products. However your Board believes that the
association by consumers of coffeeheaven with innovation and quality is
essential to CHIP's competitive positioning particularly as markets mature.

In addition we have continued to focus this year on the capabilities of our
product supply chain to support a national roll out.

For the most part we have decided to maintain our present policy of
'partnership-working' with local suppliers in product supply and development. To
date this approach has served CHIP well by keeping indirect overhead costs to a
minimum and providing the flexibility to work with new entrants to the supplier
market.

In selected cases we have increased direct day-to-day supervision of suppliers
and in some key product areas we have or are moving to central distribution.

Longer term we believe Poland's EU membership will have a significant positive
impact on our product supply options. However the effect and timing of this is
uncertain. In such a rapidly changing environment we are endeavouring to
maintain a flexible stance.


NEW MARKETS

We are delighted to announce that, subject to market conditions remaining
favourable, the Group expects to open coffeeheaven stores in the Czech Republic.

This will be the first step outside Poland towards meeting the Group's long term
objective of building coffeeheaven into a pan-Central European brand.

Data on this exciting market, which will be coffeeheaven's second in Central
Europe, is provided later in this report.

Although no date has been set for the opening of the first coffeeheaven store,
terms have already been agreed, subject to contract, for 2 key sites with a
major Central European developer. Further sites are under consideration in both
the capital Prague and elsewhere.

We have identified a highly talented management team for this market and expect
the set up costs of entry to be modest.

In addition to the above the Group is in very early stage discussions for entry
into at least one other Central European market through acquisition.


FINANCIALS

Results

Turnover expressed in sterling for the 12 months to 31 March 2003 increased 92%
(104% in Polish zlotys) to #1,490,144 (same period 2002 unaudited: #777,252). On
an annualised run rate basis (i.e. all stores trading a full 12 months) this
represents estimated sales of #2.1 million.

CHIP reported a post tax profit in Poland expressed in sterling of #36,661
(Polish Accounts - audited) as shown on page 22 in the Pro-forma Group Profit
and Loss Account and produced a positive EBITDA of #90,718 (unaudited).

Combined store net operating margins for the 12 month period were 17% of sales
(4 months to 31 March 2002 - 19%) excluding the store in Gdansk but including
our one loss making store (as detailed above).

CHIP continues to operate at positive cash flow from operations during the
current year.

The Group loss after taxation for the 12 months to 31 March 2003 was #121,147
and is arrived at by deducting from the profits of CHIP net expenses of #158,119
(prior period 4 months to 31 March 2002 - #48,141) incurred by the Company in
the UK. These relate almost entirely to the expenses of maintaining the
Company's AIM listing and similar UK corporate non-trading expenses. A breakdown
of these costs is provided in the notes to the Pro-forma Group Profit and Loss
Account. Some of these costs are non-recurring but most will remain relatively
fixed in value on an annualised basis as the CHIP revenues grow.


Foreign Exchange

Foreign exchange movements between four currencies being Pounds Sterling (GBP),
Polish Zlotys (PLN), Euros (EUR) and US dollars (USD) impact the Group results
in various ways.

All revenues of CHIP are in PLN. However importantly, CHIP's property lease
rentals are expressed in terms of USD, EUR and PLN but all payable in PLN. Thus
the exchange rates between the USD/EUR and the PLN has material significance for
the Group.

Over the financial year to 31 March 2003 currency movements of a weakening USD
and strengthen EUR against the PLN has resulted in a broadly neutral profit
impact for CHIP.

The results of CHIP are converted from PLN to sterling. Over the period there
has been a general weakening of the PLN against GBP of about 9%. To illustrate
the effect of this, sales for the year to 31 March 2003 if converted at the
rates used for the 31 March 2002 statements would have resulted in a sales
figure in sterling of #1,616,927 almost 9% greater than the reported #1,490,144.

In the current year CHIP has fully hedged its USD rental exposure for the 12
months to 31 March 2004. However because of the current strength of the EUR and
its anticipated weakening against the PLN over the coming year, CHIP has not, as
at the date of this report, hedged this position.

The Group is also exposed to currency risk in relation to some product supplies
but at this time the associated potential financial risk is not considered
significant.


Funding

* Bonds

As previously announced, following a decision by the Polish Securities and
Exchange Commission on 22 April 2003 authorising CHIP to release a Prospectus
covering up to 20 million zlotys (approximately #3.3 million) of bonds for
public trading, CHIP issued Series 'A' bonds amounting to 14 million zlotys
(approximately #2.3 million before expenses) which was fully subscribed. These
bonds, which are non-convertible, are issued for a term of 5 years with interest
fixed at 10% per annum. Bondholders are also entitled to participate in up to
16% of the annual profits of CHIP over the 5 year term. A complete English
translation of the Prospectus and terms of the Series 'A' issue can be found on
the Group's web site at www.coffeeheaven.eu.com.

As indicated above your Board believes that the success of this issue in such
challenging capital markets is a significant endorsement of coffeeheaven's
impact on the Polish consumer market. Your Board also believes that the terms
achieved by CHIP are highly attractive to the Group. Not only are the bonds
non-convertible (protecting Group shareholders from further equity dilution) but
also the interest rate secured was, at that time, only 5% above Polish
Government 5 year Bond rates and only some 2.75% above similar bond issues by at
least one of Poland's leading companies.

Most importantly, the Group now has (based on present circumstances) the funding
secured to complete its development programme over a period to end 2006 in
Poland. We believe this gives the Group flexibility in future investment
decisions and brand building activities, and releases limited management
resources from the time consuming process of fund raising to focus on the
business.

* Preference Shares

On 10 July 2003 the Company issued a circular to shareholders proposing the
purchase and effective cancellation of the Company's outstanding 990,000 #1
Preference Shares for a consideration of #250,000. To fund this transaction the
Company issued 36,000,000 new ordinary shares raising #288,000 before expenses.
On 5 August 2003 an Extraordinary General Meeting of the Company approved this
transaction.

The reasons for this transaction, which are set out in detail in the circular
which is available on the Company's web site, may be summarised as:

   *increases the equity in the Group attributable to ordinary shareholders
    by some #740,000 (before expenses).

   *increases the likelihood of ordinary shareholders receiving a dividend by
    eliminating the preference dividend of 5%.

   *makes the Group generally more attractive to capital markets and
    potential investors.

   *reduces the possible adverse impact of new accounting standards on the
    Group's Balance Sheet gearing ratios particularly following the issue of
    bonds.

Your Board believe this was an important and timely transaction for the Group.
In arriving at the appropriate purchase consideration your Board took
independent financial advice including an independent valuation.

The above transactions have had a significant impact on the Group's Balance
Sheet, which is now considerably strengthened as compared to 31 March 2003. On
page 27 of this report in Notes to the Financial Statements we set out a
Pro-forma Group Balance Sheet as at 31 March 2003 adjusted to reflect the impact
of the elimination of the Preference shares, the issue of bonds and the issue of
new ordinary shares. Shareholders are strongly urged to review this statement.


ECONOMIES AND MARKETS

Central Europe

The Group's target markets are those countries running north to south through
the centre of Europe from the Baltic States in the north to Bulgaria in the
south. This represents a target market of some 100 million inhabitants.

Whilst the region comprises many countries with very different characteristics,
a number of common factors provide the macro-economic drivers for a brand such
as coffeeheaven.

These may be summarised as:

* the region as a whole is growing more than the global average with output
growth of more than 3%.

* most countries are on track to join the EU between 2004 and 2010.

* with few exceptions the modern retail market is not saturated.

(source: A.T. Kearney GRDI)

In summary - the region is one with all the opportunities presented by 'catch-up
economies'.


POLAND

Key Data:
Population: 38.7M
GDP growth rate 2002: 1.3%
Forecast GDP growth 2003 and 2004: 2.8%/3.7%
Inflation current: 0.4%
Unemployment current: 17.4%

Economic Update

After three years of sluggish growth, there are indications that the Polish
economy will improve in 2003 and beyond. Most commentators also agree that the
country should benefit almost immediately from the increased confidence and
stability that prospective EU membership brings.

The referendum decision by the Polish people to join the EU on 1 May 2004 may
have profound positive long term effects on the economy. As the largest of the
new EU entrants, Poland stands to receive some 14BN EUR of EU funding between
2004 and 2006, equivalent to 2.4% of GDP per year over the period.

Your Board believes that admission by the EU of such a large country to
membership will have more than just a 'one way' effect. Poland has 27 votes in
the enlarged EU, the same number as Spain and only 2 less than France, Germany,
Italy and the UK. Although future restructuring of EU voting might reduce this
weighting (unlikely before 2009), it does move Poland to centre stage in EU
decision making. Bluntly, Poland will now have a major influence on decisions
that will effect every EU citizen. Inevitably such influence could be of immense
benefit to Poland and its economy.

Retail and Retail Development

'Poland has the largest amount of shopping centre space coming on-line in Europe
in 2003-04 with estimates that it will reach 1.7 million square meters outpacing
its nearest rivals Spain and the UK.' (source: HISAG)

'Poland is the largest country in Central Europe in terms of both area and
population and yet has one of the lowest shopping centre floor space provisions
at 62 sq. m per 1000 people compared with the European average of 143 sq. m.'
(source: CEREG 2003)

We believe that these two facts more than anything else are what make Poland
such an attractive market for the Group. Its demographically young population,
growth prospects and specific consumer response to new retail concepts all make
Poland one of the strongest expanding retail markets in Europe.

Market Risks and Competition

Under the Sales section of this report I referred to the potential
cannibalisation of CHIP's sales as new retail space comes on-line and gave this
as a key reason why your Board expected CHIP's like-for-like sales growth to
slow.

Given the retail investment statistics set out above there is little doubt in
our view that there will be an 'overshoot' in retail capacity both of available
tenants and customers.

However we believe this will be temporary. In its annual report on the Polish
Retail Market, C&WH&B indicates that Poland will be the new destination for some
100-125 international retailers over the 5 years to 2007 - a 61% increase. This
together with projected rates of real growth in wages and private consumption
should take up any 'over capacity' slack in the market.

For CHIP the above provides both an opportunity and a risk.

The opportunity is the ability to secure key sites, quality market penetration
and continuing undisputed leadership in a temporarily weakened market. The risk
is that it may be sometime before the traffic flow and customer 'spend' in these
new shopping centres becomes sufficient to provide adequate returns on the
Group's investment.

There has been no significant change to the competitive environment for
coffeeheaven in Poland during the last year.

A small number of coffee distributors continue to maintain and in some cases
modestly expand their retail coffee bar presence in the Polish market. So far as
your Board is aware none of the major UK or North American speciality retail
coffee chains are represented in Poland.

However as the market grows we are seeing an increasing number of 'opportunity
entrants'. Generally these are businesses with one or two units that are often
weakly funded or are set up as non-core activities within other unrelated
businesses. On one street in Warsaw even the 'UK syndrome' of
a-coffee-shop-on-every-corner is developing. This is not unexpected and is
already addressed in CHIP's development strategy. In a few very specific
locations this activity is putting pressure on the availability of sites.

In time we believe that many of these smaller operators will fade through
economic attrition or simply move the retail units they control onto the 'next
new thing'.

Longer term, the risk is that these 'opportunistic' operators will damage the
overall coffee shop market in Poland by providing consumers with low quality
products and service at unjustifiably high prices. This could result in a
consumer backlash against the sector as a whole.

Fiscal Matters

Of significant future benefit to the Group is the recent announcement by the
Polish Government that, effective 1 January 2004, corporate rates of income tax
rates will reduce to 19% from the current level of 27%. This change brings
material alignment between UK and Polish corporation tax rates.

In addition, further economic stimulus is being contemplated for the Polish
economy through the introduction of a flat tax on personal income.


CZECH REPUBLIC

Key Data:
Population: 10.3M
GDP growth rate 2002: 2.0%
Forecast GDP growth 2003 and 2004: 3.2%/3.7%
Inflation current: 1.0%
Unemployment current: 9.6%

Economic Update

In its latest report on emerging European Markets C&WH&B placed the Czech
Republic second on a list of the 13 most economically promising Central European
countries. (Poland came third).

The Czech Republic has for some time been hyper-attractive to international
investors. A principle driver for this has been retail expenditure levels that
are amongst the highest in Central Europe. This is reflected in both the Czech
economy and the sophistication of its retail structure. Further the Czech
capital Prague is now one of Europe's leading tourist destinations swelling
potential consumer numbers.

Investment in new retail development, although not at the levels being seen in
Poland, remains strong.

All of the above produces a retail market with considerable potential to develop
further on the back of an increasingly affluent population, an improving
infrastructure (that is already far superior to its much larger neighbour
Poland) and increasing demand for western-style living. As in Poland, the
economy is likely to receive a further boost when the Czech Republic joins the
EU on 1 May 2004.

Market Risks and Competition

Although a significantly more developed and sophisticated market than Poland, so
far as your Board is aware, there are no coffee/sandwich bar chains similar to
that of coffeeheaven and no UK or North American coffee bar chains currently
operating in the Czech market.

Whilst we believe that the market will not be as easy to penetrate as Poland,
the relatively small land mass, and good infrastructure means that a national
presence could be established much more rapidly than in Poland.


THE FUTURE

With significant long term funding now in place, your Board remains confident
that the business can be grown successfully in the Polish market to the target
50 stores by the end of 2006.

In the current year CHIP is facing some new challenges. During the last four
months like-for-like sales growth has slowed and we have experienced some near
term disappointments with the timing of new sites. At this point we cannot be
certain as to whether these challenges are temporary or of a more embedded
nature. However the Group has the cash resources and hence the flexibility to
take a long term view.

A great deal has been achieved in a very short time since the Company first
listed on AIM. The coffeeheaven brand has not only become market leader in a
growing sector within a major European market but has established itself as the
only national coffee/sandwich bar chain in Poland.

Your Board considers the long term stimulus that EU membership will provide to
the many economies of Central Europe enhances the Group's prospects for success
in other Central European markets similar to that which has been achieved in
Poland.

We believe that the 'era of Central Europe' is here and look forward to the task
of driving the development of coffeeheaven in these exciting and challenging
markets.



Richard D. Worthington
Executive Chairman

14 August 2003


PRO-FORMA GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 March 2003

                                              Pro-forma      Pro-forma
                                                   2003           2002
                                              12 months      12 months
                                                trading        trading
                                            to 31 March    to 31 March
                                                   2003           2002
                                            (unaudited)    (unaudited)
                               Pro-forma
                                    Note              #              #

Turnover                                       
Stores - Poland                     1          1,490,144        729,477
Materials and all store
operating expenses excluding
depreciation - Poland                         (1,123,680)      (563,322)
------------------------------------------------------------------------  
Net cash inflows from store
operations - Poland                              366,464        166,155

Administrative costs                   
excluding depreciation and
interest - Poland                      2       (263,058)      (359,266)
Store pre-opening costs - Poland       3        (12,688)        (6,978)
------------------------------------------------------------------------  
Net cash inflows/(outflows)
from operations - Poland(EBITDA)                 90,718       (200,089)

Depreciation store and other                   
assets - Poland                        4       (125,006)       (61,968)
Foreign exchange gains,
taxation and other
adjustments - Poland                             62,609        (89,419)
Interest receivable - Poland                      9,778          3,852
Interest payable - Poland                        (1,438)             -
------------------------------------------------------------------------  
Profit/(loss) on ordinary                        
activities - Poland                              36,661       (347,624)

------------------------------------------------------------------------  
Add: Corporate administration         
expenses - UK                          5       (158,119)
Less: Interest receivable - UK                      311
------------------------------------------------------------------------  
Group loss for the financial period             (121,147)

------------------------------------------------------------------------  


Notes to the Pro-Forma Group Profit and Loss Account

1. Turnover and all expenses (other than those shown as UK) are received
   or incurred in Polish zlotys and converted to pounds at the rate of #1 =
   6.391 PLN which was the rate in force at 31 March 2003. For
   comparability the 2002 results have also been translated at this same rate.

2. Administrative costs - Poland: includes all overhead costs attributable to
   the business in Poland.

3. Store pre-opening costs - Poland: represents expenses on stores incurred
   prior to opening.

4. Depreciation - Poland: includes the total depreciation charge for all 
   business assets in Poland including non-store assets.

5. UK expenses are almost entirely those incurred as a result of the Company's
   public listing on AIM, together with Directors' fees for services as members
   of the coffeeheaven international board only. Costs (including fees,
   salaries and expenses) of Directors who perform services in Poland are paid
   by CHI Polska S.A. and are included above under Administrative costs -
   Poland.


GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2003

                                                              4 months
                                                            trading to
                                                 2003    31 March 2002
                                                    #                #

Turnover                                    1,490,144          313,109
Cost of sales                                (774,629)        (147,763)
-----------------------------------------------------------------------  
Gross profit                                  715,515          165,346

Distribution costs                            (22,297)          (8,769)
Net operating expenses                       (885,625)        (250,073)
-----------------------------------------------------------------------  
Operating loss                               (192,407)         (93,496)

Other interest receivable and similar          10,179           27,100
income
Interest payable and similar charges           (1,528)             (14)
-----------------------------------------------------------------------  
Loss on ordinary activities before           (183,756)         (66,410)
taxation

Tax on loss on ordinary activities             62,609                -
-----------------------------------------------------------------------  
Retained loss for the financial year         (121,147)         (66,410)

-----------------------------------------------------------------------  

Loss per share
- Basic                                         (0.06p)          (0.04p)
- Fully diluted                                 (0.06p)          (0.04p)


GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH
2003
                                                              4 months
                                                            trading to
                                                 2003    31 March 2002
                                                    #                #



Loss for the financial year                  (121,147)         (66,410)
Currency translation differences              (74,491)          (2,001)
-----------------------------------------------------------------------  
Total recognised gains and losses relating   
to the year                                  (195,638)         (68,411)
-----------------------------------------------------------------------  


GROUP BALANCE SHEET AS AT 31 MARCH 2003

                                                     2003         2002
                                                        #            #

Fixed assets
Tangible assets                                   906,776      505,744

Current assets
Stocks                                             38,122       26,378
Debtors                                           296,766      149,296
Cash at bank and in hand                           34,124      199,564
-----------------------------------------------------------------------  
                                                  369,012      375,238

Creditors: Amounts falling due within one        
year                                             (239,561)    (102,794)
-----------------------------------------------------------------------  

Net current assets                                129,451      272,444
-----------------------------------------------------------------------  

Net assets                                      1,036,227      778,188
-----------------------------------------------------------------------  

Capital and reserves
Called up share capital                         1,209,459    1,141,126
Share premium account                             760,410      375,066
Profit and loss account                          (933,642)    (738,004)
-----------------------------------------------------------------------  

Shareholders' funds                             1,036,227      778,188
-----------------------------------------------------------------------  

Attributable to equity shareholders                46,227     (211,812)
(Note: see Pro-forma Group Balance Sheet in
Note 1 below)

Attributable to non-equity shareholders           990,000      990,000
-----------------------------------------------------------------------  


GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2003
                                               
                                                              4 months
                                                            trading to
                                                 2003    31 March 2002
                                                    #                #

Net cash (outflow) from operating            (102,973)        (164,202)
activities
Returns on investments and servicing of         8,651            4,372
finance
Capital expenditure                          (569,203)        (129,570)
-----------------------------------------------------------------------  
                                             (663,525)        (289,400)

Financing                                     453,677          441,636
(Decrease)/increase in cash                  (209,848)         152,236
-----------------------------------------------------------------------  

Reconciliation of net cash flow to
movement in net debt

(Decrease)/increase in cash in the           (209,848)         152,236
period

Cash acquired on CHI Polska SA merger               -           47,328
-----------------------------------------------------------------------  

Change in net debt                           (209,848)         199,564

Net funds at 1 April 2002                     199,564                -
-----------------------------------------------------------------------  

Net funds at 31 March 2003                    (10,284)         199,564
-----------------------------------------------------------------------  


NOTES

 1. Pro-Forma Group Balance Sheet

                       Audited      Post     Purchase      Bond    Pro-forma
                         Group   Balance          and     issue        Group
                       Balance     Sheet cancellation        in      Balance
                         Sheet     total           of    Poland     Sheet as
                      as at 31   Placing   preference                  at 31
                         March    of new       shares             March 2003
                          2003  ordinary         Sale
                                  shares
                             #         #          #           #            #

    Fixed assets
    Tangible assets     906,776                                       906,776

    Current assets
    Stocks              38,122                                         38,122
    Debtors            296,766                                        296,766
    -------------------------------------------------------------------------  
    Cash at bank
    and in hand         34,124    394,200   (250,000)   2,092,921   2,271,245
    -------------------------------------------------------------------------  
                       369,012                                      2,606,133
    Creditors:Amounts
    falling due within
    one year         (239,561)                                       (239,561)
    -------------------------------------------------------------------------  
    Net current assets 129,451                                      2,366,572
    -------------------------------------------------------------------------  
    Creditors:
    Amounts falling 
    due after more
    than one year                                     (2,092,921)  (2,092,921)
    -------------------------------------------------------------------------  
    Net assets       1,036,227                                      1,180,427
    -------------------------------------------------------------------------  
    Capital and
    reserves
    Called up       1,209,459    52,000    (990,000)                  271,459
    share
    capital
    Share premium
    account           760,410   342,200                             1,102,610
    Capital
    redemption
    reserve                 -               740,000                   740,000
    Profit and
    loss account      (933,642)                                      (933,642)
    -------------------------------------------------------------------------  
    Shareholders'    1,036,227                                      1,180,427
    funds
    -------------------------------------------------------------------------  
    Attributable       46,227                                       1,180,427
    to equity 
    shareholders
    -------------------------------------------------------------------------  
    Attributable
    to non-equity
    shareholders       990,000                                              -
    -------------------------------------------------------------------------  

 2. 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 2003 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.

 3. Basis of preparation

    The preliminary results have been prepared under the historical cost
    convention and in accordance with applicable United Kingdom accounting
    standards. The principal accounting policies of the group are set out in the
    group's 2002 annual report and financial statements. The policies in this
    preliminary announcement have remained unchanged from those 2002 financial
    statements.

 4. Earnings per share

    Earnings per ordinary shares is calculated as follows:

                                                Basic    Fully diluted
                                                 2003             2003
                                                    #                #

    (Loss) attributable to ordinary          (121,147)        (121,147)
    shareholders
    Weighted average number of ordinary   197,564,481      197,564,481
    shares
    Earnings per ordinary share                 (0.06p)          (0.06p)

 5. The Directors are not proposing that a dividend payment be made.

 6. Copies of the Report and Accounts will be available from the offices of
    Seymour Pierce Limited at Bucklersbury House, 3 Queen Victoria Street,
    London EC4N 8EL.



                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
FR PJMLTMMTBBRJ