Cooks Coffee reports NZ$407k profit amid NZ$1.9m net liabilities

Robust Sales Growth Masks Financial Fragility

Cooks Coffee Company Limited (NZX:CCC) delivered a solid operational performance in FY26, with group store sales in its core UK and Ireland markets surging 22.8% to NZ$95.8 million (£42.17 million). EBITDA rose 14% to NZ$1.39 million, or NZ$1.9 million when normalising for one-off UK transactions. The company expanded its footprint by 18%, ending the year with 105 stores, well ahead of industry growth rates of 3.5% in the UK and 2.5% in Ireland.

However, beneath the surface of expansion and rising revenues lies a more nuanced financial picture. The Group reported a modest net profit of NZ$407,000, yet its balance sheet remains stretched with net liabilities of NZ$1.897 million and current liabilities exceeding current assets by NZ$1.68 million. This precarious liquidity position prompted the auditor to highlight a material uncertainty regarding the company’s ability to continue as a going concern.

Store Expansion and New Partnerships Drive Revenue

The UK segment saw store numbers rise to 82, with average store sales up 4.9% to NZ$848,850 (£373,636). Regional developers in the Southeast of England posted a 39% sales increase, underscoring the effectiveness of localised growth strategies. Ireland’s continuing store sales jumped 26% to NZ$30.5 million (£13.4 million), boosted by the addition of five new Tesco outlet stores and a growing franchise network.

Esquires Coffee’s partnership with Tesco in Ireland, operating five in-store outlets, is still nascent but contributed 2% of total Irish store sales in FY26, with expectations for significant growth in FY27. The company-operated Dairygold stores in Ireland generated NZ$5.3 million (£2.3 million) in sales, representing 17.6% of the Irish systemwide sales.

International Ambitions with Master Franchise Deals

Internationally, systemwide sales edged up 1%, with stable operations in Saudi Arabia, Pakistan, Portugal, and Jordan. Notably, Cooks signed Master Franchise Agreements in May 2025 for India and in December 2025 for the UAE, aiming to tap into these fast-growing markets. The company has committed to opening three new stores in these regions in FY27, leveraging its UK and Ireland experience for global expansion.

Balance Sheet and Going Concern Challenges

Debt levels fell from NZ$4.3 million to NZ$2.86 million, and lease liabilities remain substantial at NZ$27.7 million. Despite these improvements, the Group’s equity remains negative at NZ$(1.897) million, reflecting prior investment write-downs. The auditor’s report explicitly flagged material uncertainty over going concern due to net liabilities and working capital deficits.

The Board’s confidence in continuing operations rests on forecasts projecting positive cash inflows of NZ$2.4 million in FY27, contractual commitments from franchisees to open approximately 20 new stores annually in the UK, and ongoing efforts to sell regional development rights in untapped UK regions. The average income per new UK store in its first full year is estimated at £16,000, while in Ireland, the figure is higher at €50,000 per store.

Governance and ESG Commitments Amid Compliance Gaps

Cooks Coffee maintains a strong focus on Environmental, Social, and Governance (ESG) principles, embedding sustainability throughout its operations and community engagement. The company recently won Irish Franchise Association awards for expanding franchisor and franchisee excellence.

On governance, the Board comprises eight directors, including four independents, but does not meet all NZX Corporate Governance Code recommendations, notably lacking a majority of independent directors and a formal diversity policy. The Audit and Risk Committee includes an executive director, falling short of best practice. The Board is developing an executive remuneration policy expected by August 2026.

Outlook Hinges on Expansion Execution and Financial Stability

FY27 has started positively with new store openings in the UK, Ireland, and international markets. The company targets 300 stores across the UK and Ireland by FY34, aiming to sustain its growth trajectory well above industry averages. Yet, the material uncertainty on going concern and negative equity position temper the optimism.

Investors should watch how Cooks manages its liquidity, debt obligations, and the successful rollout of master franchise agreements in India and the UAE. The balance between aggressive expansion and financial prudence will be critical in determining whether the Group can convert its promising operational momentum into sustainable profitability.