A busy day in the Warsaw Underground !

Not just another coffee shop chain - this one is a brand leader and is only trading in Eastern/Central Europe (i.e. the countries recently admitted to the EU destined for substantial business growth). The company is creating new outlets at a fair old pace and take a look at their website - these are quality stores in high-profile locations like major airports, railway stations etc. Website: http://www.coffeeheaven.eu.com

APRIL 2006 TRADING UPDATE!!! Total Gross Revenues for 12 months to 31st March up 66% to £6.3M (2005: £3.8M) Lots more info. on new markets and stores click here to read the full details. Stores: 43 (up from 32) stores currently trading (Poland: 30 (up from 23), Czech Republic: 6 (Up from 2), Latvia: 7 with a further 5 units under construction including Bulgaria and sites secured in Romania (subject contract). Bulgaria & Romania are seeking to join the EU from January 2007. Sites located in key high street, shopping malls or Airport locations. Company growth target: increase number of units by at least 20 units to some 63 units by 31 March 2007. Aim being to achieve this level of growth within present Cash resources.Cash balances at 31 March 2006 were approximately £2.9M (2005: £0.7M). Debt was nil (2005: £ 2.5M): Nil Debt! Positive EBITDA: For the year ending 31 March 2006, Group EBITDA expected to be firmly positive after charging UK and new market development costs but before exceptional costs relating to the cancellation of bonds (previous Debt). Forecasts: Based on present trading conditions and current exchange rates we anticipate indicative sales of £9.3M for the year to 31 March 2007. This includes indicative sales of £0.4M from Bulgaria, which will be reported but not consolidated. From Richard Worthington (Chairman and Chief Executive): ‘The new financial year has started well. There is no doubt that the significant economic improvement in our markets is feeding through to consumer confidence and spending. The strength of the coffeeheaven brand ensures we are ideally positioned to benefit from our customers' increasing prosperity.’

ethel - the new charts come from the moneyam beta test versions which were put on the BB by IanT, I believe that they will soon be replacing the existing charts in the "Charts" menu option.

In January this year Fyshe Horton Finney issued a research note which can be read on the Coffeeheaven website http://www.coffeeheaven.eu.com go to "Latest News" in the menu followed by "Research Notes & Brokers" (note that you will need to install the free software Winzip to "unarchive" the document and Adobe Acrobat Reader to read the PDF file).

This note says BUY with a target price of 2.5p.

2.5p is a good target price to aim for this year. Longer term holders will witness a price many multiples of this.

Hope this isn't too long for you (as the b......)

The buy note

Fysche Horton Finney LTD

Bull Points + Bear Points –
Leading market position in Poland Yet to report a Full Year (FY) profit
Second largest coffee bar operator in Latvia The market in the company’s shares can be illiquid
Strong management team Normal Market Size only 25,000 shares
Recent share purchases by Directors
Operating in the growing economies of Central Europe
Positive Group EBITDA and approaching profitability
Strong Polish currency should boost Full Year (FY) figures
Potential takeover target
coffeeheaven international plc (COH.L)
Market: AIM
BUY - TARGET PRICE 2.5p
HIGH RISK
Jan 2005

Key Information
Share Price 1.05p (offer)
52 Week High/Low 1.48p/0.8p
Normal Market Size 25,000 shares
Market Makers 3
Market Capitalisation 4.16 m
Next Results due Sep 2005
AGM Dec 2005
Gearing 101% (post placing)
Financial Performance and Forecasts
Year Revenue Pre-tax EPS
Ending (000s) (000s) (p)
Mar 03A 1490 -184 -0.06p
Mar 04A 2107 -418 -0.15p
Mar 05E 3600 - -
Mar 06E 6500 - -

coffeeheaven international plc (COH)
COH operates speciality branded coffee bars in Central Europe and currently has a presence in Poland, Czech Republic and Latvia. Its
retail portfolio comprises 32 stores (Poland 23, Czech Republic 2 and Latvia 7) but management suggests that the number could increase
to 40 stores by spring 2005 and have targeted 50 stores in Poland alone by the end of 2006. In Poland COH occupies the number one
position in the branded coffee bar market and in a recent survey was voted the 4th leading gastronomy brand by consumers at Warsaw
International Airport (behind McDonalds, KFC & Pizza Hut). The company was once part of UK listed Bakery services PLC but following
a de merger in 2001 COH is now a separate operation with a strong and innovative management team and a solid funding platform from
which to grow the business. COH recently purchased a 20% stake (with an option to acquire the remaining 80%) in Coffee Nation,
Latvia’s second largest coffee bar chain. This move clearly demonstrates COH’s aspiration to extend across its sphere of interest spreading
from the Baltic States to Bulgaria. Indeed, with a potential market of around 100 million consumers there should be sufficient demand to
meet COH’s ultimate aim of having over 300 branded stores in Central & Eastern Europe. The store portfolio will grow organically and by
way of acquisition and the company aims to reach first or second position in each Central European market it enters.
COH is a rapidly growing company which should continue to deliver positive news flow as it develops these new and exciting markets. In
fact the company is already ‘actively planning’ in Ukraine, Romania, Slovakia and Bulgaria. Moreover, as COH strengthens its store
portfolio and moves towards profitability, it is not inconceivable that it might attract the predatory attention of one of the large
international coffee bar companies.
We believe that for long term investors who are willing to accept the increased risk of investing in a small overseas trading company, COH
represents an attractive BUYING opportunity at these levels.

Current Trading
The company has already delivered strong sales growth since its inception in 2001. For the full year (FY) ending 31st March 2004, total
sales increased by 57% with like for like sales up 17%. The HY figures to 30th September revealed more of the same with total sales 55%
higher and like for like up 9%. Looking ahead, the company is confident that full year revenues will reach 3.6 million which would
represent growth of over 70% on last year. However, it should be noted that this year’s growth will have been flattered by favourable
currency movements. At constant exchange rates FY sales growth should be comparable to last year.
Although the FY sales figure will contain a limited contribution from the 2 Czech stores none of the Latvian revenues (estimated to be
500,000 for 2004) will be included. Having visited the Coffee Nation stores in Riga, we expect that COH’s management experience and
operational savvy will lead to much improved numbers in the next financial year.
COH is likely to issue a trading statement in February 2005. We predict that this will reveal pleasing sales growth and also provide an
update on progress at the new stores in Prague.
Venturing further ahead to the FY ending March 2006, we forecast total revenues of 6.5 million which would represent an annual sales
growth in excess of 70%. Our forecasts assume:
(1) The Pound (GBP) to Polish Zloty (PLN) rate remains close to the current level
(2) Total stores in Poland and Czech Republic increase to 36
(3) The inclusion and improvement of revenue from Coffee Nation, Latvia.
Financials
Learning the mistakes of failed UK coffee chains, CEO, Richard Worthington, appreciates that the blind pursuit of top line growth can be
ultimately destructive. COH operates a strict policy of matching infrastructure investment to sales and applying a disciplined approach to
new site selection. Because of this, the company maintains that its benchmark operating model is more financially robust than comparable
businesses in the UK. However, COH is investing in a comprehensive IT management system and a central distribution process. Although
this inevitably increases near term costs it is essential for the long-term success of the business.
COH is currently in a ‘development phase’ - prudently investing its store portfolio and establishing itself as a prominent consumer brand in
its chosen markets. Consequently, the group has yet to report a profit (HY 2004: -197,000). However, at this point in the company’s
development this does not give cause for concern. Importantly the HY figures show that COH has, for the first time, reached positive
group EBITDA and we believe that the company is approaching profitability in sterling terms.
The HY results show that net cash inflows from store operations increased by 77% (23.5% of total sales) whilst administration costs
advanced by only 5.7%. If net cash inflows can be maintained at the same % of total sales then the FY figure should be around 850,000
up 102% on last year. In contrast management anticipate FY administration costs increasing by no more than 12%, giving a maximum of
336,000. Therefore, investors should expect a positive FY EBITDA significantly ahead of last year.
COH’s balance sheet appears reasonably robust. FY results for 2004 show net assets of 1.124 million including cash at hand of 1.227
million. The cash at hand principally derives from a PLN 14 million-bond issue redeemable in 2008 and funds received from the issue of
new shares. On 6th January 2005 COH placed 80 million new shares @ 0.75p raising 600,000 to help fund expansion in Czech Republic
and Latvia. Although this is diluting to existing shareholders, it is encouraging to see that Richard Worthington (CEO) put in 25,000 and
Diggle Investment Limited, a company of which he is a director, invested 100,000 in the placing. Considering that trading cash flows
now cover interest charges, it is unlikely that the company will return to the market to raise additional equity capital in the next financial
year unless a new and sizable acquisition opportunity emerges.
Foreign Exchange Movements
It is of significant importance that the best performing currency in the world during 2004 was the Polish Zloty. Indeed, as COH generates
the majority of its revenues in Poland, the Zloty’s strength should deliver a double whammy in the upcoming full year results. Firstly,
whilst most COH’s revenues are denominated in Zlotys its property lease costs are in USD or EURO. Over the last 12 months the Zloty
has appreciated 19% against the USD and 16% against the EURO, which means that in Zloty terms actual leasing costs should have fallen
considerably. Secondly, the Zloty has also strengthened against GBP by 14%. So when COH comes to report its Zloty revenues in GBP
they will be markedly higher in sterling terms than they would have been if the exchange rate had remained constant.

The Central & Eastern European Economies
One of the principal attractions of COH is its focus on the consumer markets of Central & Eastern Europe. By avoiding the crowded UK
market Richard Worthington has stolen a march on the industry and gained prominence in an economically resurgent and increasingly
westernised area. The coffee bar industry in these economies was, prior to COH’s entrance, extremely disparate and this fragmentation has
allowed COH to cement its position as the clear market leader in Poland. Indeed, the board has stated that it is not aware of any UK or
North American branded coffee chain operating in Poland or the Czech Republic and, I am sure, this extends not only to Latvia but to all
COH’s target markets.
The case for operating in Central Europe becomes even more compelling when one considers the macro economic position. Without doubt,
membership of the EU has only served to augment the growth and development of the Polish economy. GDP growth in Q2 2004 was an
impressive 6.1% with Q3 at 4.8% and expectations for 2005 at well over 4%. Moreover, the economies of Poland and the other accession
states are likely to receive a welcome boost from the considerable inflow of EU structural funds which, in Poland’s case could top EURO
12.5 billion over the next 24 months. Indeed, as Poland’s young and increasingly affluent population become more receptive to ‘new’ and
western retailing concepts, COH will be one of the major beneficiaries. This position is echoed in COH’s other existing and potential
markets.
There are very few UK listed companies that are able to offer the same level of exposure to the rapidly expanding economies of Central
and Eastern Europe.
BUY

Weak holders selling out @ 1.35p. Wonder if price will dip again tomorrow or are the MM's just tempting people to sell?
UC.

does anyone know why the drop in SP

I do not know they keep on moving the spread and price does not matter if there is a lot of buys or sells. I have had these for ages and still know I will have to wait but I am geting a bit sick and tired of the moves. still interesting 1m transaction and there have been a few of those so who knows.

This one's a long termer guys - the MMs will carry on moving prices up and down to drum up both buying and selling trade at these levels, after all that's how they earn their money.

COH haven't quite proved themselves yet in the eyes of watching investors. The company is going from strength to strength, however all of the results in the trading update were not eye opening material (for temporary reasons as explained in the interims).

A string of ever improving results is all that will be needed to attract a flock of buyers and the price will go zooming up. Until then sit back and relax and think of the time in the future with COH shareprice at 20p+ when you'll be glad that you were one of the few with vision who bought in at around the 1p mark.

Any thoughts on why this is now drifting down. After good results and with lots of potential. Agree this will take time and ever improving results will attract buyers but ther does not appear to be anything out there to warrent this reaction

i'm with you cannot understand what is happening would expect small rises not these drops, cannot sustain any rises for some reason...

With the May issue of the European Business Magazine carrying this article it's amazing that the price is slipping:

"COFFEE BEANS & BUCKS
To become a big fish in the coffee-bar market, first find a smaller pond

How do you win the UK's increasingly competitive coffee bar game, with US powerhouse Starbucks pushing down margins and driving up prime real-estate prices for locals like CaffNero and Costa Coffee? Answer: Go to Poland.

And then Latvia and the Czech Republic and maybe Ukraine, Romania, Bulgaria...Yalta.

Well, that's what Richard Worthington's theory was four years ago when he opened a coffee bar chain, called Coffee Heaven, in Poland. It now has 32 locations in three countries and is headed for 350 shops in the next few years stretching from Warsaw to Odessa..."

Website is: http://www.europeanbusiness.eu.com/index.html

I've been building a nice stake in COH over the past month,

Has anyone got any views why the price is not moving?

Dave - COH certainly have plenty of media exposure but still relatively few buyers are interested.

I believe that this is because all the stores are in Central/Eastern Europe and UK investors find it difficult to gauge all the differing cultural and economic factors in these wide ranging geographical locations to convince them to invest into an early stage growth company.

The only thing which will gradually make UK investors sit up is a consistent flow of results which show ever increasing profits - suddenly the realisation that this is a great company will dawn and the floodgates will be opened - until then it's a bit of a waiting game.

I've always had COH down as a safe long term hold - i.e. come back in a few years and see your original investment multiplied many times over.

Am with you overgrowth, this is long term hopefully a ten bagger or more but it won't happen over night, look at the lack of posters here for a start that indicates lack of exposure/investor interest, it will happen, the CEO has excellent track record of building brand, 5 years and I hope to be looking to pay off my mortage from COH investment...

There are three big pluses making COH a dead cert to hold till it comes good.

1) E. Europe has to be part of any serious investor's asset allocation - its potential for growth and the work ethic of a populatiion finally allowed to engage in free enterprise is enormous. Look at the potential for mortgages, credit cards and other personal financial products too, as they rise to meet the affluent standards of the old W. Europe.

2) The very caution of the CEO that keeps the SP from being a tearaway, volatile high-flyer is what will keep our company solvent in this frontier market long enough to enjoy the profits that must come.

3) Who occupies the prime retaile sites all over the West End of London - Starbucks, Caffe Nero, etc, etc. - the same in any city, new or old. Pouring hot water onto coffee grounds is probably the highest gross profit retail business ever.

Keep the faith - drink coffee (preferably in Warsaw!)

sd

Here's why the price has been all over the place:

"RNS Number:8132M Coffeeheaven International PLC 26 May 2005

coffeeheaven international plc
('coffeeheaven' or the 'Company')
Issue of Equity

coffeeheaven is pleased to announce a placing of new ordinary shares to raise 270,000, before expenses. The funds raised will provide additional working capital for the Company and in particular, to fund expansion in the Czech Republic and Latvia.

In the placing the Company will issue 27,000,000 new ordinary shares of 0.1p each at a price of 1p each. The Company will make application for the 27,000,000 new ordinary shares to be admitted to trading on AIM and dealings in the new ordinary shares are expected to commence on 2 June 2005."

Looks as though it's all priced in now.

Worth the small dilution to ensure that the expansion of outlets continues at a rapid rate.

How many dilutions in the past 2 years?

I am with you zscrooge. While I do believe in the longer term the price will never rise until the market sees some real return. If taking all the pain is now so the chain can be built, I suppose it has merit but to be honest the model is not yet proven. Perhaps a bit of consolidation may have been worthwhile after all there are still no major chains going in. Only time will tell. LOL

An interesting article in the Warsaw Business Journal today:

http://www.wbj.pl/?command=article&id=26948

http://www.wbj.pl/?command=article&id=26979&type=wbj

Interesting rumour about possible Starbucks pre-agreement with COH but are they buying up stores at too high a price?

More dilution after today's RNS?

I seem to remember recently that when Cafe Nero published fantastic results COH benefited.... hopefully some good news on the speculative Coffee Rebublic takeover could also give COH a northwards push.
Here's hoping anyhow!

Excellent trading from CHIP (CoffeeHeaven In Poland) announced today:

The growth is really starting to show through now - just look at the phenomenal increase in net cash flows!!!

"Coffeeheaven's principal trading subsidiary, CHI Polska S.A. ("CHIP"), today announced in Poland its results for the year ended 31 March 2005 prepared in accordance with PL GAAP.

An extract from this announcement is set out below.

During the year ended 31 March 2005 sales at CHIP grew 45% to 21.91M PLN and earnings before interest, taxation, depreciation and amortization (EBITDA) grew by 142% to 2.36M PLN (prior year 0.98M PLN).

Net cash flows from operating activities grew 533% to 2.93M PLN (prior year 0.46M PLN).

CHIP reported an operating profit of 0.47M PLN (prior year loss 0.40M PLN) before other operating expenses/income, financial expenses/income, extraordinary expenses/income and taxation."