Cooks Coffee Company (NZX:CCC; AQUIS:COOK) Interim Results

“Continued growth and move into Group profit for the period”

Cooks Coffee Company (NZX:CCC; AQUIS:COOK), the international coffee focused café chain, announces its results for the six months ended 30 September 2024.

Period Highlights

Post Period Events

Group store sales for the seven-week period to 17^th November have maintained the positive momentum seen over the past six months with total store sales in the UK up 39.4% and in Ireland store sales up 17.9% compared to the previous year.

The Company remains dedicated to building the business based on ethical principles and community values. The Company was delighted with the achievement of the Caerphilly store in Wales in being awarded the best Ethical Café in Wales. This is an important recognition of the strong commitment the Company has to ethical practices.

Aiden Keegan, CEO of Cooks Coffee Company, commented: “The Board is very pleased to report a strong period of growth for the Group resulting in a profitable performance in the period. This is testament to the hard work of all our franchisees and strong offering that we provide. The Group continues to open new stores in desirable locations which will have all performed well to date. 

“We are also delighted that the momentum experienced in the first half has continued and the Group expects to deliver a robust set of numbers for the full year.”

Enquiries:

 Chairman’s Statement

I am delighted by the positive trading performance in the first half of the financial year and that this momentum has continued into the second half of the financial year. This positive growth, largely driven by the opening of new franchised stores, has been the key factor in delivering a profitable EBITDA trading performance of NZ$0.826m in the first half of this financial year compared to a loss last year.

Given the continued momentum, the Directors expect that the financial performance in the second half of the year will deliver another profit broadly similar to that which was achieved in the first half.

The Company’s revenues are largely derived from the royalty contributions which are related to the sales that each site achieves.  The focus of the Directors is to encourage and support the franchisees to grow and make sure that there is a solid pipeline of new stores in both core markets of UK & Ireland that will build upon the growth for FY25 to date.   

Store sales trends have been very positive in recent times, with the Company benefitting from the ‘working from home’ trend, which we are confident will remain in one form or another as a permanent change in consumer behaviour in the post Covid environment.

The Company added a net eight new stores to the franchised network in the UK and Ireland during the six month period. The number of stores is expected to grow in the second half of the year, with eight further store openings planned in the UK and two in Ireland. We anticipate that this will take the total number of stores to around 90 in the UK and Ireland by the end of March 2025, with the total store numbers expected to reach 110 across the whole Group. 

Esquires UK achieved record daily sales per store in October 2024 and, following a strong performance in the first six months, the Directors are confident that the business models are well suited to the current consumer market.  These positive results are being achieved despite the concerns being expressed regarding the general economic outlook. The expansion of the successful Regional Development model will assist in accelerating growth in the network in the UK. The Company is seeking Regional Development partners for Scotland and Northern Ireland.

Business Performance

Esquires Coffee United Kingdom

UK store numbers were 68 at the end of September 2024, up from 60 as of 31 March 2024. Sales from the Esquires outlets for the six month period were up 36% compared to the same period in FY24.

The average per outlet store sales for the first six months increased 16% compared to FY24, reflecting the successful implementation of our strategy to enhance store locations.

The Regional Developer model in the UK has proved to be a significant driver of store growth, especially in the South & East of England. With two new Regional Developers being appointed in the second half, the Company expects to see the tangible results of their involvement develop over time.

During the year, two stores at Horsham and Dorking were renovated, with sales showing gains in excess of 50% in each store for the first three months of opening post renovations compared to prior year sales.

As of January 2024, industry specialists Allegra reported that the UK branded café market comprised of 10,199 stores with store sales of £5.3 billion which is projected to grow to £7.2 billion by 2029 with the numbers of branded stores estimated to be 11,629. There were 12,212 Independent cafés with store sales of £4.6 billion at January 2024 which is expected to grow to 13,214 stores with total sales of £5.6 billion by 2029. The total market for cafés in the UK is £9.9 billion and this is projected to grow to £12.9 billion by 2029. Branded café sales share is projected to grow from 53% in 2024 to 56% in 2029.

The Esquires current share of stores is only 0.3% of the total stores in the UK and our aim is to grow this to at least 0.5% by 2029. This shows the significant potential that exists in the UK market where the café density is considerably lower per capita than in New Zealand.

Esquires Ireland

Brendan Duigenan was appointed Managing Director in May 2024 following the retirement of Tony McVerry who founded the business in Ireland in 2002. Brendan has been with Esquires Coffee in Ireland for five years as Operations Manager and prior to that had extensive experience in senior roles in Starbucks and AMT Coffee in Ireland.

Brendan has recently appointed Barry Gardner as General Manager of Operations. Barry has excellent experience in the café business in Ireland and most recently has managed several cafes within the well known Arboretum group of Garden Centres.   

The Galway (Eyre Square) store is now under new management with Agata Danielkiewicz, the franchisee in Limerick taking over both this store and the Limerick site from June 2024. Sales in the store have grown by 14% since the change and the Company is proud that the new owner has maintained the store’s position as the best-loved coffee shop in Galway, holding the number one spot for cafés on TripAdvisor for the past several years.

According to Allegra, the Irish branded café market is reported to have 705 stores as at March 2024 and is projected to grow at 2.6% CAGR to 2029 when the numbers of branded stores are estimated to be 800. The Esquires current share of stores is 2.1% and the Company is planning to increase this to 3.75% by March 2029.  

International

Store sales in Portugal where Esquires has two stores in Porto have grown by 44% over last year. The original store is 14% ahead of last year in sales whilst the franchisee has added a new store in the same general area of Porto.

In Pakistan, the Esquires business is growing under a new Master Franchisee with store sales for the six months to September at more than double the levels of 12 months ago. There are now 6 outlets in Karachi with growth plans to add more, along with moving into other regions of Pakistan based on the confidence gained in Karachi.

In Saudi Arabia, sales have declined as the Jeddah Airport contract for one of the two stores came to an end. The Airport accounts for more than 60% of the total sales in Saudi Arabia but, whilst this has had an impact in this region, it is not material to the Group.

ESG

The Board has established a formal ESG Committee with Elena Garside as Chair. The committee includes Directors and Senior management and will be an important body to oversee the Company’s progress in this key area. Below are some examples of the strategies that are already in place.

 Corporate – Transition to UK

The Company is continuing its planned transition to relocate the business to the UK where most of the business operates. This will improve efficient working practices and focus the business on its growth strategy in the core markets of UK and Ireland.

In July, we were delighted to welcome Gareth Lloyd-Jones and Gordon Robinson as Non-Executive Directors based in London. As planned, Mike Hutcheson and Paul Elliott stepped aside after long and excellent service as Directors. We have been grateful for the excellent contributions from Mike and Paul who have added considerable value. Gordon Robinson, an experienced Non-Executive Director has assumed the role of Chairman of the Audit & Risk Committee, Elena Garside is heading up the ESG committee and Gareth Lloyd-Jones who has extensive experience with franchising and public companies  with his involvement in Tie Rack and Maddison Coffee has taken on the role of building greater relationships with the capital markets in the UK along with the CEO and Chairman.

As reported in the Annual Report, the Company appointed Aiden Keegan as CEO with effect from 1^st April 2024. Recently, Katherine Scott has been appointed CFO and both Aiden and Katherine have joined the Board as Executive Directors as is customary in the UK.

Summary and Outlook

The Directors believe that the Company has turned a corner which is evidenced by its return to profitability.  The prospects for the Company for the remainder of the financial year and beyond are encouraging as the trading momentum has continued and store sales trends have been very positive. There is a solid pipeline of new stores in both core markets of UK & Ireland.

The Cooks Coffee model being operated by Esquires is based on a locally focused franchised network and is very scalable in a capital light manner. With the focus on core markets, we believe that we have critical mass with an ability to grow rapidly in exciting growth markets. 

In Ireland there is a solid pipeline of new store opportunities that we expect to deliver in the second half of the year.

The target of having 300 stores in the UK and Ireland within 10 years remains, and the solid base being established in these core markets will enable expansion in other attractive markets and provide the base for potential value enhancing opportunities that will add to shareholder value. 

Given the solid pipeline of new stores, the Company expects that we will continue to grow the number of Esquires outlets operating in UK & Ireland by the end of March 2025 and we expect to have more than 100 stores operating during 2025.  With the Company now firmly back into growth and encouraged by current trading we remain confident about the future prospects of the Group and view the future with optimism.

Keith Jackson

Executive Chairman

Note: The Company’s reporting currency is New Zealand Dollars (“$”)